Eye Care Financing: 5 Qualities Any Reputable Lender Will Have

Financing Wheat from Chaff

In today’s eye care market, competition is fierce. To stay competitive —and even survive—you must constantly be reinvesting in your business and growing your practice. To do that, you need access to capital. But what if you don’t have it? Financing can be tough to find and even tougher to get. Not only that, but the myriad of fly-by-night and disreputable lenders out there make it no wonder that financing is such a challenge for eye care providers.

The Problem With Traditional Financing

The healthcare market is incredibly dynamic and complicated, and that makes it difficult for providers to find the right kind of financing solutions. Commercial banks struggle to judge the healthcare market or understand ECPs’ challenges and needs, and as a result are often unable to structure a loan that makes sense to a practice. One example? Many states have ‘corporate practice of medicine’ restrictions that can easily derail a commercial loan in underwriting.

Eye Care: A Niche Market

Any lender you consider should be well-versed in professional corporation compliance requirements, fee splitting, referral restrictions, ethics rules, and more. That’s why specialty firms that focus on healthcare financing – and optometric business solutions in particular –  can be a good option. These firms often:

  • Better understand provider challenges, needs and the complex reimbursement environment. Hence, they can offer what many banks cannot, with a more diverse and creative product offering.
  • May not require a personal guarantee, which is very scary for physicians. Instead, loans may be collateralized by assets like A/R or even inventory.
  • Avoid the ‘bait and switch’ model. Commercial banks sometimes offer loans with terms that they can’t actually finance because they don’t understand the healthcare market. Unfortunately, those loans must often be restructured in underwriting, or won’t close at all.
  • Offer clear direction on responsibilities to ensure a timely closing. A bank may indicate that they’ll start the process and conduct due diligence in 30, 60, or even 90 days. As a result, the borrower remains unclear on the timeframes and next steps.
  • Respond quickly, with authority. At most banks, the borrower-facing account executive has no authority. In contrast, specialty firms more often have an open-door communication policy with far less bureaucracy for borrowers to navigate.

Buyer Beware

Government and financial regulations don’t apply to private equity like they do to banks. On one hand, this usually means they have more creativity to structure a financial solution tailored to your specific needs and goals. On the other hand, you probably remember the “creative financing” that led to 2008’s global financial crisis. The lesson? You need to know your rights as a borrower and work with a reputable lender or broker. Additionally, be sure to verify any loan offer with your own research and calculations. 

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