Do your research to find best terms for business loan

Practice Management. By Julie A. Jacob, AMNews staff. June 24, 2002.

By the time you graduate from medical school, you probably never want to hear the word "loan" again. Yet there will likely come a time when you, or your medical group, will need a business loan. With a little comparison shopping and careful planning, you can find a loan with reasonable interest rates and repayment terms.

Business loans can be necessary for many reasons: to purchase another practice, buy a medical office building, purchase medical equipment or remodel the office, said Gayle L. Rosenfeld, vice president of professional services division of Fleet Bank Financial Co. in Boston.

Taking out a business loan involves weighing the benefit of what the loan is paying for versus the cost of the loan and interest. The benefit can be monetary, as in increased revenue, or something intangible, such as boosting patients' perception of the practice by remodeling the waiting room.

Physicians can get a loan from either a bank or a finance company. Each source has its advantages and drawbacks, say loan experts.

It's easier to get a loan from a finance company, said Andrew D. Schwartz, a CPA who works for MDTaxes.com, an online tax resource for physicians. The paperwork is usually less than for bank loans, and the finance companies have less stringent requirements for borrowers than banks do. In addition, finance companies may offer no-money-down terms for purchases of equipment.

Interest rates on loans from finance companies, however, are often higher than loans from banks, said Schwartz. In addition, loans from finance companies often "come with lots of strings attached," he said. For example, some finance company loans may forbid early repayment of the loan or require borrowers to pay back all of the interest, even if they repay the loan early. [...]