People are living longer today more than ever before and because of that a large portion of the United States’ population is ageing and retired. The USA’s healthcare system was already under a huge strain before Covid 19, but now it’s nearly buckling! With a vulnerable population and thousands of patients being discharged from hospitals to home healthcare agencies, now is a prime time to start your own healthcare company to help fill in the gaps in the system. Every startup needs capital and one of the most efficient ways to acquire that is a loan.
Healthcare startups are in demand
Banks don’t just want to provide loans to the healthcare industry, they want their deposits and their bank accounts too. It’s a good investment, making it much easier for someone working in the healthcare field to secure a loan. The downside is that said loans come with more strings attached and require you to pay special attention to the contracts you sign. It’s important to understand what you’re giving up for collateral, who is financially liable if the loan defaults, and if the repayment plan is even possible for the scenario you’ve envisioned.
You have options
The two most common types of loans a healthcare startup will apply for are a business term loan and a medical practice loan, though sometimes if other avenues fail a Small Business Association (SBA) backed loan may be attractive. Each one requires increasingly more paperwork and specific criteria. With medical practice and SBA loans typically preferring the company to have been operating for at least a year. Additionally, there are alternative financing options such as business credit cards and lines of credit but we’re focusing specifically on loans. In other places like Australia, things are different and you may need a local mortgage broker like Blutin Finance to walk you through all the options you have.
The SBA and medical practice loans also have other criteria to be taken into account. For medical practice loans, you should be operating in specific businesses, such as a local doctors office or an optometrist, the actual specifics of which may vary depending on who the loan is from. The SBA on the other hand has several different programs available depending on whether you’re a woman, planning on opening a business in a rural area, and others as well.
What you need to provide
When you go to apply for a loan you will be expected to provide some documents. The documents requested may vary but usually include:
- Personal Information and Identification
- A Detailed Business Plan
- A Personal Credit Report
- Income Tax Returns
- Bank Statements
- Financial Statements
- Relevant Business Licenses
- Articles of Incorporation (If you’ve already filed for your business)
- Financial Projections
Once all the necessary paperwork has been submitted it’s a matter of deciding just how large of a loan you need. Once you have an amount, that will inform what term length is best. Traditionally, term loans of three years or more are for larger amounts of capital, but shorter terms may be available. You will also be expected to explain the loan’s investments. Most banks will be none too pleased with a proposal that contains details that are out of character for the type of business presented. Meanwhile, the federal government has strict regulations on paying down personal debt with a business loan.
The waiting game
Now you wait. Depending on who you’re waiting to hear from it could be as short as a week or as long as three to four months. The SBA for example is notorious for taking an extended period to get back to individuals about their loans, while larger banks have a shorter turn around time.
Things to remember
Now that you know how to apply for a loan, here are a few things to keep in mind. As a startup, you will have a more difficult time securing good terms because your business hasn’t been in operation. You don’t have an established revenue stream which will make it more of a risk.
Difficult does not mean impossible! A mistake that many medical professionals and entrepreneurs make is not searching for the best deal for fear of hurting their credit. The risk falls in simply not acting quickly enough. While a single credit check can negatively impact your credit score, credit bureaus will recognize an influx of credit checks over two weeks for what it is: checking rates. The bureaus will then treat it as one single check. So shop around!
Remember to be honest with these lenders. Don’t lie on your applications, be honest with yourself, and be patient. Armed with this knowledge you should have what you need to start securing a solid loan for your startup.