Medical financing is business funding that covers the gap between paying costs and collecting insurance or patient revenue, such as payroll, supplies, and equipment. Bank term loans, SBA 7(a) loans and lines of credit usually cost less and run longer, but they take more time and paperwork. Merchant cash advances and revenue-based funding approve faster on card and deposit revenue, at a higher total cost.
What does medical financing cover in a practice? #
Most practices don't borrow because they're failing. They borrow because the money goes out before the money comes in. Payroll runs every two weeks. Rent is due on the first. Gloves, sutures, lab panels and imaging contracts get billed on their own schedule. Meanwhile, claims go out and wait.
Medical financing is the bridge for that timing problem, and sometimes for a planned purchase. The common uses we see are:
- Payroll and staffing during a slow month or while a new provider ramps up.
- Supplies and pharmaceuticals when a bulk purchase earns a discount.
- Equipment such as exam tables, dental chairs, ultrasound units or an in-house X-ray.
- Reimbursement gaps when a payer is still processing claims or a new provider is waiting on credentialing.
- Facility work like a build-out, a sterilization upgrade or an EHR migration.
What it does not cover is a patient's personal medical bill. This page is about funding the business that runs the clinic.
Where do cash gaps in a medical practice come from? #
The cash cycle in a medical practice is long and uneven. Services are delivered today. The claim is coded, submitted, possibly denied, resubmitted, and then paid, sometimes weeks or months later. Patient balances take longer still. During that stretch, the practice is carrying real costs with money it doesn't yet have.
Three patterns cause most of the trouble:
Seasonality. Flu season and the start of the year bring volume, but January also resets patient deductibles, which means patients pay more of the bill and some delay. Summer and holiday weeks slow elective procedures. A dermatology or orthopedic practice can see revenue swing sharply from one quarter to the next while rent and salaries stay flat.
Payer lag. A new physician who joins the group may bill for months before payers finish credentialing. For example, a practice that adds a surgeon with a 90-day credentialing window still pays that surgeon's salary and malpractice premium the whole time.
Equipment timing. A clinic that buys a $60,000 imaging unit needs the money at install, but the revenue from it arrives patient by patient over years. The purchase often makes sense. The timing is the problem.
Identify which of these you have. The right funding depends on whether your gap is a few weeks, a few months, or a multi-year asset.
When do bank term loans, SBA loans and lines of credit fit? #
Banks and SBA-backed lenders are the right tool for many practices, and we'll say so plainly. They generally offer the lowest cost and the longest repayment terms of any option on this page. If you are buying a long-lived asset, funding a practice acquisition, or refinancing expensive short-term debt, a bank term loan or SBA 7(a) loan is often the best answer.
The SBA 7(a) program is government-guaranteed, which lets lenders extend longer terms and, in many cases, lower rates. The trade-off is paperwork. Expect to provide several years of business and personal income filings, current financial statements, a debt schedule, a personal financial statement and often a business plan. For an established clinic with clean books, that is manageable. For a practice that is three months old, it's often a barrier.
A line of credit suits the recurring gap. You draw what you need for payroll or supplies, repay it when claims clear, and pay interest only on the amount drawn. Lenders in this group generally want a solid track record, and they may require pledged assets or a personal guarantee from an owner.
Where banks are slower or harder to access is the same place the other options earn their place: when the timeline is days, when your credit history is thin, or when your revenue is strong but your tax returns don't yet show it.
When does revenue-based or merchant cash advance funding make sense? #
Revenue-based financing and merchant cash advances (MCAs) approve on what your practice actually takes in. Lenders look at card and deposit activity in your bank and merchant processing statements. Because the decision rests on current revenue rather than years of tax history, approval can come in days rather than months, and collateral is usually not required.
The payment structure is different too. Instead of a fixed monthly installment, many MCAs take a fixed percentage of daily card receipts or a set amount on a schedule that tracks deposits. When collections are slow, payments are smaller. When they are strong, the balance clears faster.
That flexibility has a price, and it is higher than a bank loan. The total payback is set up front as a factor rate (for example, 1.25 over 8 months ≈ 65–75% APR), which we cover in detail below.
Here is when this category makes sense for a practice:
- A payroll deadline is less than two weeks away and a bank timeline won't meet it.
- A payer delay has created a known gap that will close within a few months.
- A time-sensitive supply or equipment opportunity has a short window.
- The practice has steady card and deposit revenue but limited tax history.
Here is when it doesn't: when the need is long-term, when the money could be borrowed more cheaply, or when the practice has no clear plan to close the gap that the advance is covering.
How do you read the true cost: factor rates versus APR? #
The most common mistake in this market is comparing a factor rate to an interest rate. They are not the same thing, and the difference can be large.
A factor rate works as a multiplier applied to the sum you're advanced. On a $50,000 advance at a 1.25 factor, you repay $62,500, so the cost of the money is $12,500. Unlike interest, that cost doesn't shrink as you pay down the balance. On an 8-month term, the same 1.25 factor works out to roughly 65–75% APR.
To compare it with a loan, convert it to an APR-equivalent. The exact figure depends on how fast the balance falls, so ask any provider to show you the APR-equivalent in writing before you sign.
| Option | Typical cost | Speed | What it needs |
|---|---|---|---|
| Bank term loan | Interest rate; usually the lowest-cost non-government option for strong credit | Several weeks to a few months | Income tax filings, financial statements, and often pledged assets or a personal guarantee |
| SBA 7(a) loan | Rate capped by SBA formula over a base rate; typically lowest cost and longest term here | One to several months | Everything a bank asks for, plus SBA eligibility and a personal financial statement |
| Line of credit | Interest on the drawn balance; some fees | Weeks, sometimes faster for existing bank customers | Bank statements, financials, credit history, sometimes pledged assets |
| Equipment loan | Interest rate; the equipment often secures the loan | Days to weeks, depending on vendor and lender | Vendor quote or invoice, financials, sometimes a down payment |
| Revenue-based financing | Fixed total payback, often shown as a factor; for example, 1.20 over 9 months ≈ 50–60% APR | Days to about two weeks | Card and deposit history, 3–6 months of bank and processing statements |
| Merchant cash advance | Factor-based pricing; a 1.25 multiple over 8 months works out to about 65–75% APR | Often a few days after documents | Card and deposit history, 3–6 months of bank and processing statements |
Two things to check before you accept any offer. First, confirm whether the cost is a factor or an interest rate, and ask for the APR-equivalent. Second, check whether early repayment reduces your cost. Some agreements charge the full factor regardless of how quickly you pay, and others offer a discount for early payoff. Both are legitimate, but they change the real cost by a lot.
How does approval work for medical practices? #
Lenders in this space ask a consistent set of questions: how long the practice has been operating, how much revenue it takes in each month, how steady that revenue is, and whether the owners can show a plan for repayment.
Documents usually include:
- Government ID for each owner above a stated ownership threshold
- Business bank statements, commonly 3–6 months
- Merchant processing statements, if you take cards
- A profit-and-loss statement and, for larger requests, a current balance sheet
Read this as general information rather than advice for your practice. Numbers here are illustrations, with an APR-equivalent beside each factor rate, and your terms are only those in the agreement you sign. How our desk runs and how it is paid.