Both exist. Most loans to a physician or therapy office are secured by something: the equipment being financed, the practice's receivables or general business assets, usually with the owners signing personally as well. Fully unsecured practice loans exist too, priced on cash flow and credit.
An article from Quillhaven Financial in Huntington, West Virginia on what secures a practice loan: the usual collateral, loans without real estate, equipment as its own security, personal signatures, an invented comparison and the Cabell County practice counts behind it.
Business Loans for Doctors: What Usually Secures Them
The answer depends on what the money buys. A loan for an imaging unit or exam-room equipment is usually secured by that equipment. A line of credit for payroll may be secured by the practice's receivables, the money insurers and patients owe it. A term loan for a buy-in may be secured by the share purchased and the practice's assets. Lenders file a public notice of their interest, called a UCC financing statement, to record the claim.
On top of the collateral, lenders commonly ask the physicians who own the practice to sign personally. That is a promise that the owners will repay if the practice cannot, and it puts personal assets behind the loan.
The medical practice page covers the main loan types for physicians, and the equipment page covers imaging and exam-room equipment.
Healthcare Practice Loans Without Real Estate as Collateral
Many practices lease their space, so a building is not available as collateral. That is normal, and practices still borrow. Without real estate, lenders look to three things: equipment, receivables and cash flow.
Receivables are valuable but not simple. Claims can be denied, reduced or delayed, so a lender lending against receivables often advances only a share of their face value and asks for a regular aging report. Cash flow lending looks instead at the practice's deposits and earnings and relies more on the owners' credit and personal signatures.
A practice with strong, steady collections has more choices, including lines that are lightly secured. A newer practice or one with uneven collections may be asked for more security.
Equipment Loan for Doctors: The Machine as Its Own Collateral
Equipment loans are the clearest secured loans a practice takes. The lender holds a lien on the equipment until the loan is paid, and because medical equipment has a resale market, the lender may need less additional security. The term usually follows the equipment's useful life.
Some equipment, such as computers and software, has little resale value, so a lender may treat its financing as partly unsecured or keep the term short. A lease is another route; at the end the practice may own the equipment for a small buyout or return it, depending on the lease.
Signing Personally on a Practice Loan: What a Cabell County, WV Physician Should Know
A personal signature, often called a personal guaranty, means the owner promises to repay the business's debt from personal assets if the business does not. It is common on small-business loans, including loans to physician practices.
Read what the guaranty covers: the full loan or a part, a single loan or every debt to the lender, and whether it ends when the loan is repaid. A physician who leaves a practice should ask whether the guaranty ends too. A lawyer can review the document before it is signed.
An Invented Comparison: Secured Equipment Loan Beside Unsecured Working Capital
Illustration only, invented figures: a therapy office needs $85,000. Option one is a secured equipment loan for new treatment equipment over 60 months at an invented annual rate of 9.5%: a payment of about $1,785 a month, about $107,109 in total (our arithmetic).
Option two is an unsecured working capital loan for the same $85,000 over 18 months at an invented annual rate of 15%: a payment of about $5,303 a month, about $95,449 in total. The secured loan has the lower payment and the longer term; the unsecured loan is repaid sooner and leaves the equipment free of a lien.
Which is better depends on what the money is for and how long the practice will use it. Neither set of figures is an offer.
Physician, Dental and Therapy Office Counts Behind This Article
County Business Patterns counted 89 offices of physicians, 27 offices of dentists and 47 offices of other health practitioners, such as chiropractors and physical therapists, in Cabell County, WV in 2023, a total of 163 practice locations with employees (our sum of three codes). No county sector paid more in wages than health care and social assistance, at $944.8 million a year.
Of the physician offices, 31 had fewer than five employees. The chiropractic and therapy page and the credit line page cover the other loan types practices use.
- Ask what each offer takes as collateral and whether a UCC filing covers all business assets.
- Ask whether a personal guaranty is required, for how much and for how long.
- Compare the total cost of secured and unsecured offers over the time you will use the money.
- Check whether a lien on all assets would limit the practice's next loan.
By Quillhaven Financial · Updated
