Whether a medical practice loan is secured or unsecured depends on what it pays for. Equipment financing for a Duncan, OK physician office is secured by the device it buys, with a term set near that device's working life. A term loan for a lease buyout or furnishings may be secured by business assets or a personal guarantee, depending on the funding partner's review.
Equipment financing is secured by the device and runs about as long as it does. Lease buyouts and furnishings can go on a term loan, payment dates can follow insurance remittances, and early payoff terms are worth reading before signing. A practice purchase can go on a term loan for the business side only; the building is outside this site.
Equipment terms matched to device life
A device that earns for seven years can be paid off over five or seven; one that is out of date in three should not run longer than three. That is the logic behind equipment financing terms for an ultrasound unit, a lab analyzer, an autoclave or an EKG cart: the device is the collateral, and a term that ends before the device wears out keeps the balance below what it is worth.
Invented figures for a $68,500 ultrasound unit at 9.75% a year. Spread over 60 months in this example, the unit costs $1,447.01 a month and $86,820.60 in all; spread over 84, it costs $1,128.35 a month and $94,781.40 in all. The seven-year version trims $318.66 from each monthly bill in the example and adds $7,960.80 to what the practice pays overall.
County Business Patterns lists 33 offices of physicians (NAICS 6211) in Stephens County, OK for 2023, 14 of them (42.4%) with fewer than five employees, and $26.8 million in annual payroll paid by all 33 together. For ZIP 73533, ZIP Code Business Patterns shows 29 physician office locations in 2023.
Offices of other health practitioners (NAICS 6213), a code that covers chiropractors, physical therapists, optometrists and others, had 23 county establishments in the same 2023 file. The same matching of term to working life applies to their treatment tables, exam lanes and therapy equipment.
Longer terms for a lease buyout or a furnishings package
An imaging unit or a lab analyzer on an operating lease ends with a choice: return it, renew it, or buy it out. When the practice keeps it, the buyout price is a purchase like any other, and a short term loan can carry it.
Invented figures: a $14,200 buyout at the end of a lease, financed over 24 months at 10.5%. In this example the payment is $658.54, the 24 payments total $15,804.96, and the finance charge is $1,604.96.
Furnishings are the other case for a longer term loan: exam tables and stools, waiting room seating, workstations and a check-in kiosk bought as one package. Each item lasts for years, so the term can too. Buying the practice itself can be funded on the business side; the building or real estate, office space and building work are outside this site. More on practice funding sits on the medical practices page.
Reimbursement timing and monthly payments
A practice is paid on claims, and claims are paid after they are submitted, coded and processed. Money from a busy week reaches the account weeks later, while payroll, supplies and the equipment payment come due on their own dates.
- Ask the partner whether the payment date can sit a few days after the practice's largest remittances arrive in a typical month.
- Check days in accounts receivable on the billing report before choosing a payment size.
- Leave room for denied or delayed claims; a payment sized to a perfect month fails in an average one.
- Use a line of credit, not a longer equipment term, for the gap between a busy week and its remittances.
A forecast that puts each remittance in the week it is expected, as the 13-week example on the blog hub does, shows whether a monthly payment fits before the agreement is signed.
Early payoff and refinancing questions
Early payoff saves money only when the agreement lets interest stop. Some agreements charge a prepayment fee, and some precompute the interest, so paying early saves less than it looks. Read the payoff clause before signing.
Invented figures, with no prepayment charge assumed: on the 60-month ultrasound agreement above, the balance after 24 payments is $45,008.22 in this example. The 36 payments left come to $52,092.36, so in the example paying off at month 24 saves $7,084.14 in interest.
Refinancing an existing equipment agreement is a new request: a partner looks at the balance, the device's age and the practice's statements. A refinance can lower the payment by stretching the term, but the device ages on the old schedule, so a longer new term can outlast the equipment. Comparing the payoff figure plus the new agreement's total against the payments left on the old one shows whether the change saves money or only spreads it out.
Call (580) 205-7694 or use the request form; the blog lists the other articles.
By Tealreach Lending · Updated
