Healthcare financing for medical professionals

Healthcare finance is provided for purchase of medical equipment, balance transfers of existing term loans, expansion of healthcare facilities, etc

August 03, 2013 1:16 IST | India Infoline News Service
What does a doctor do if he needs to expand his business or purchase a very expensive medical equipment. Does he take recourse to a home loan, mortgage loan or personal loan or is there a loan which is tailored to meet his professional needs. A number of financial institutions now provide healthcare financing.

If you are a doctor or healthcare professional and looking to expand your business, the article will guide you on the requirements needed to avail of such a loan.
A new loan product, healthcare finance is offered by banks and non-banking financial companies to doctors, medical practitioners, limited companies, private hospitals, eye and diagnostics centres, pathology laboratories, nursing homes, medical and dental colleges. It is offered against the security of equipment and personal guarantee. Healthcare financing is also offered to speciality clients like skin and dental clinics.

Healthcare finance is provided for purchase of medical equipment, to refinance an existing lien on free medical equipment, balance transfers of existing term loans and expansion of existing healthcare facilities among others. The applicant can also avail loan to buy ancillary equipment like air conditioners and lifts along with medical equipment.

Financial institutions like India Infoline Finance, Reliance Commercial Finance and HDFC Bank provide such loans.

Who can avail of a loan?
Healthcare finance can be availed by partnership firms, trusts, societies and private hospitals engaged in the healthcare services. It can also be availed by a self-employed doctor with minimum experience of three years.

How long does the loan process take?

The applicant has to fill in the loan application form and provide the necessary documents. The documents required include professional qualification certificates in the case of doctors, minimum three years of work experience in the relevant healthcare field, details about the funding requirement/project report, last three years income tax returns, last six months bank statements, track record of past loans if availed, proforma invoice of the equipment to be purchased, and desired know your customer documents.

Anyone availing of a loan will have to furnish a guarantor as insurance in case of default by the borrower.
If the borrower is an individual promoter, private limited company or a partnership firm, then the audited balance sheets and profit and loss account statements of the last three years will have to be attached. A private limited company needs to attach a copy of the memorandum of association, while a copy of partnership deed is required for a partnership firm.

The time taken to sanction a loan may vary depending upon the nature of the loan, quantum of funding and location. It usually takes four to five working days after submission of the required documents for the loan to get approved.

Loan amount and tenure
The maximum loan amount is usually capped at 80% of the cost of medical equipment. Some financial institutions may offer up to 90% of the total loan amount depending upon the financial strength of the customer. Loans are also offered for the purchase of second-hand equipment. In this case, the equipment is valued by an independent valuer. Based on the valuer's report, around 65% of the total loan amount may be provided to the borrower.

The minimum loan amount availed by small players is Rs. 2 lakh, while the same for large corporates is Rs. 15 crore.

In terms of repayment, the minimum tenure is about 12 months, whereas the maximum is around 84 months. The average loan tenure is 61 months.

Interest rates and insurance
These loans come with an average interest rate of 14% per annum. To get a better deal, do not forget to negotiate the interest rate. You will need to avail of a fire/burglar insurance to protect the medical equipment against any damage or loss.

Additional charges:
The processing fee on such loans is usually 1% of the total amount availed. This fee is paid only once and is non-refundable. Some financial institutions also levy prepayment charge if you wish to pay the loan before the tenure of the loan.

To sum up, a borrower needs to consider the rate of interest, additional charges like processing fee, prepayment penalty charge, late payment fee etc, documents required, approval time and the loan term before availing a loan.

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