Dermatology Business Loans: How to Secure Financing
Unless you have a surplus of cash, you’ll likely need a dermatology business loan to help you make necessary investments. The good news is, there are numerous types of dermatology practice loans available to small business owners.
However, depending on your financial situation, some loans can be difficult to qualify for. Therefore, we wrote this post to help you improve your chances of getting a loan. In the sections that follow, you’ll learn about:
- The typical eligibility criteria for dermatology business loans.
- Actions you can take to improve your chances of qualifying for additional working capital.
- The options available for financing your dermatology practice.
Eligibility Criteria for Dermatology Business Loans
Individual lenders’ policies will vary, but at a high level, all small business lenders evaluate candidates based on the Five C’s of Credit. The Five C’s and the way each is measured are shown in the table below:
|The Five C’s||How Lenders Measure It|
|Character||Business and personal credit reports and scores|
|Capacity||Debt-to-income ratio as shown on business financial statements|
|Capital||Net worth as shown on business and personal financial statements|
|Collateral||Loan-to-value ratio based on collateral appraisal value|
|Conditions||Loan amount, prevailing interest rates, and loan purpose|
It’s worth noting that many lenders also set minimum requirements for your time in business. If your business is brand new, even great personal credit and strong financials may not be enough to qualify. That said, time-in-business requirements are more common and strict among traditional lenders such as banks and credit unions.
Another important eligibility criterion for dermatology business loans is the business plan. According to the Small Business Administration (SBA), “A good business plan guides you through each stage of starting and managing your business.” Fortunately, not all lenders require business plans, though traditional lenders are much more likely to.
How to Get Approved for Dermatology Practice Loans
Your best option for improving the chances your application is approved depends on how much time you have.
For instance, a higher credit score makes your loan application more likely to be approved. However, depending on your situation, you’ll need months—and in some cases years—to significantly raise your credit score.
Similarly, a higher net worth, steady income, and valuable collateral will all improve your odds of loan approval. Though as with your credit score, income, net worth, and collateral take years to accumulate.
If you’re on a shorter timeline, you still have financing options to choose from. Here are several ways you can better your chances of qualifying for a dermatology business loan:
- Polish up your business plan.
- Compile and consolidate your income statements, balance sheet, cash flow, and other financial information.
- Communicate quickly and clearly with your lender.
Keep in mind that these application-improving tactics are generally not as impactful as improving your finances. The better your business’s finances are, the more likely you’ll receive favorable interest rates and terms.
That said, if your application is on the fence, things like conscientious communication with your lender can go a long way.
How to Weigh Your Funding Options
One of the most powerful ways to ensure you qualify for financing for dermatologists is to choose the right type of financing. Both lender and loan types can make a huge difference in your chances to qualify.
For example, a term loan from a bank is significantly more difficult to qualify for than a term loan from an online lender. Similarly, certain loan types have qualification criteria that may be a better fit for you. For instance, a secured loan requires collateral but the credit requirements are less strict relative to an unsecured loan.
Generally speaking, these kinds of loans will have more lenient eligibility criteria than a traditional loan:
- Loans from alternative lenders
- Equipment financing
- Loan secured by collateral
- SBA loans
There are also other business financing options that aren’t technically loans that tend to be easier to qualify for. These include:
- Merchant cash advances
- Lines of credit
- Invoice factoring
How to Spend Your Dermatology Business Loan
When a lender considers your application, they’re primarily concerned with two things. The first and most important is how creditworthy you and your business are. The second is how you plan to use the funds.
After all, how you use your loan funds partially determines how able you are to pay back the loan. If you squander your funds, you’ll be short on cash, which makes you a riskier borrower to lenders.
So to improve your qualification chances, make sure you have strategically sound spending plans. Common profitable uses of dermatology financing include, but aren’t limited to:
- Hiring more dermatologists: In order to serve more customers, consider taking out a loan to recruit and pay new dermatologists.
- Moving to a larger office: If you feel cramped in your existing office, you may benefit from moving to a larger space.
- Starting a new practice: In some cases, business owners benefit from opening a new practice so that they can serve customers in a different geographic area.
- Paying for advertising and marketing expenses: To continue growing your practice, you could take out a loan to pay for sponsored social media posts, print advertising, and other common initiatives.
- Investing in new technology and/or equipment: If you have outdated equipment, you may not be able to offer the best possible service. Or, you may need to make investments to offer new cosmetic procedures and other services, such as chemical peels or more invasive offerings.
- Purchasing an existing dermatology practice: To lessen competition in your field, you may consider purchasing an existing practice.
Once you’ve decided on how to spend your small business loan, put together a budget. This will show business lenders that you’re serious and it’ll help you determine the ideal loan term, amount, and conditions.
Of course, your dermatology practice’s needs will likely shift in the long term. If you find that you need additional financing, you can always reach back out to your lender in the future to see if they can provide you with more funding.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.