The rapid innovation of medical products have increased demand among hospitals and health care providers. According to IBIS World, the industry has grown on average by 3.7% between 2015 – 2020. In fact, the market size of the medical supply industry in Canada is worth approximately 22 billion dollars. Given the market outlook of the medical supply industry, being a medical supply distributor can be a lucrative business.
Importance of a Business Loan
Whether you’re an established or novice medical supply distributor, a business loan can be a valuable tool on your journey toward success. A business loan can help you pay off your various property and sales taxes, as well as financing the cost of the land your distribution location is built on, all of which can be expensive. In fact, there are limitless other possibilities for the use of your loan, including:
Paying Your Supplier
As a medical supply distributor, you’ll need to find the right supplier, then finance the cost of overseas and/or cross-country shipping, as well as the packaging and delivery of your items.
Purchasing items from your supplier. Learn how to create a purchase order.
Inventory Costs
Often distributors will have to deal with a surplus or a shortage of supplies, which can increase inventory costs. For a medical supply distributor, you may find yourself with a surplus or a shortage of surgical tools, first-aid kits, treatment chairs, instruction manuals, sterilization chemicals, canes/wheelchairs and other reduced mobility items.
Hiring and Training Employees
Every business requires support to properly run its business operations. As a medical supply distributor, you’ll need to hire and train shipping and warehouse personnel, marketing staff, customer service staff and more. You may also need to hire technicians to install and repair a large assembly line for your warehouse.
Purchase Equipment
Buying the necessary warehouse equipment such as forklifts, electric pallets, cargo stackers, rolling ladders, shelving, trolleys, safety gear and other tools are essential to your business. You may also need to finance the costs of buying and maintaining a line of distribution/supply trucks.
Marketing Costs
Marketing your business is necessary to gain awareness and build sales. You may need to finance the advertising items and distribute them throughout various medical facilities such as senior living residences, hospitals, clinics, dental practices, sports arenas, pharmacies, and more.
Best Business Loan Providers For Medical Supply Distributors
Calculating The Cost of a Business Loan
Before applying for a business loan, it’s important to calculate your cost of borrowing. Understanding how much you can borrow can save you from taking on more debt than you can handle. Here are the four main factors to consider when calculating the cost of your business loan.
- Interest Rate – The interest rate you qualify for will have the biggest impact on the cost of your loan. The higher the rate the more interest you’ll pay. Improving your credit score, reducing your debt and overall increasing your desirability as an applicant will help you secure a low rate and keep the cost of your loan down.
- Fees – The fees charged by your lender often increase the cost of your loan by more than what you’d expect. Be sure to ask your lender about all the current and potential fees you may incur. This includes administrative fees, loan origination fees, maintenance fees, NSF fees, late payment fees, and prepayment fees.
- Loan Amount – When borrowing you need to consider how much you need and how much you can afford. For example, if you qualify for $500,000, is it something your business can comfortably repay? Borrowing more than you need or can afford can lead to higher costs and potentially unmanageable amounts of debt.
- Loan Term – Your loan term is another factor that determines the amount of interest you’ll pay on your loan. While longer terms provide smaller and more affordable monthly payments, you end up paying more interest. Similarly, when you choose a short-term loan, you end up saving on interest but your monthly payments will be higher.
Qualifying For a Business Loan as a Medical Supply Distributor
- Personal and Business Credit Score – In general, lenders will evaluate both your personal and business credit score to check your ability to repay debt. The higher your score, the less risky you’ll seem to the lender. For businesses that haven’t yet developed a business credit score, lenders will put more emphasis on your personal credit.
- Revenue – Lenders often have a minimum revenue or monthly sales requirement to qualify. This usually is a direct indicator of your ability to afford a loan. Lenders will require your revenue statements to verify your financial details.
- Cash Flow – Having a strong positive cash flow indicates you’re earning more than you are spending. Lenders often consider your cash flow, as positive cash flow means you make enough revenue to not only pay your expenses but other debts as well.
- Assets – Lenders may require an asset in order for you to secure the loan. For example, your medical inventory supplies are business assets you can use as collateral.
- Debts – Your business debt level is another factor lenders consider when approving an applicant. In general, the more debt you carry the lower your ability to take on new debt. Paying off old debts and reducing your liabilities can increase your chances of qualifying.
- Time in business – Lenders often require your business to be at least 1 -2 years old. Though some alternative lenders are willing to accept businesses that’ve been in operation for as little as 3 – 6 months. It’s a well-known fact that many new businesses fail within the first 5 years As such, the longer you’ve been established, the less risky you’ll seem.
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Business Loan Alternatives
A business loan is a versatile form of credit that can be used to finance any expense or project. However, there are many alternative business funding options, each with its own benefits and drawbacks. Depending on your needs, one may yield better results than the other.
Equipment Loan
If you need to purchase an expensive piece of equipment, an equipment loan can be a better choice as it usually offers lower rates and is easier to qualify for. The reason is, the equipment you purchase is used as collateral to secure the loan. However, unlike a business loan, lenders are usually only willing to finance up to 80% of the equipment price, so you need to pay the other 20% upfront or find another form of credit to fill the gap.
Invoice Financing
As a B2B, you’ll likely deal with slow invoices that can disrupt your cash flow. Invoice factoring can help you access these funds by selling your slow invoices to a lender at a discount. While the discount rate can be quite high, it is a fast and easy way to fund your business.
Business Line of Credit
When running a business you’re bound to run into unexpected expenses. While some expenses can be deferred others may require immediate attention. In such circumstances, a business line of credit can come in handy. It’s a reserve of cash that you can access at any point in time up to a credit limit. Moreover, interest is only charged on the amount you use and like a credit card you can reuse the funds as you pay it back.
Frequently Asked Questions
Will my personal credit affect my ability to qualify for a business loan?
How do I increase my eligibility as a business loan applicant?
Can I get a business loan for my medical supply distribution business if I have bad credit?
Use a Business Loan To Fund Your Business Today
Securing a business loan through us is not only easy, but it’s also just plain convenient. With most banks, your applications can take days, even weeks to process, only to get declined when your financial status is not up to their lending standards. However, when you apply at Loans Canada, you’ll be eligible for:
- Competitive interest rates
- Flexible payment plans
- Fasting funding (as soon as 2 days after your approval)
