If you are a doctor who is planning on starting his own practice or someone who is about to open a hospital then you are going to need to get some equipment together and that is where medical equipment loans come in. The whole healthcare industry is quite expensive these days. Studying to be a doctor is expensive, availing the services of a doctor is expensive and so is the equipment that is used to treat people. For example the x-ray viewer can cost approximately Rs. 13,000 for the basic models, one 47 litre oxygen cylinder can cost about Rs. 16,000 and examinations tables could be as much as Rs. 12,000 and above. A single MRI machine could set you back by about Rs. 1 crore.
Now imagine ordering all this in vast quantities for a fully functioning hospital. Just the thought of the cost alone is enough to give you the shivers. These costs are the reason why many banks and financial establishments offer loans for medical equipment. These loans are extended to dentists too although the limits on the loans for dentists may be different from those offered to other doctors and hospitals.
Types of medical equipment loans
Medical equipment loans are just one type of a loan offered under the umbrella of healthcare loans but they too can be categorised into 3 main types.
Loans for doctors
This is a loan that can be taken by doctors who intend to open their own medical facilities. The amount that you will be eligible to take would depend on the bank you approach. For example if you approach Dena Bank then you can borrow up to Rs. 2 crore with a maximum margin of 25%.
Loans for non-individuals
Saying non-individuals refers to partnership firms, private companies, trusts, proprietorships, etc. These loans are different from those meant for individuals because they tend to have higher limits on the amount that you can borrow.
Loans for dentists
These loans are designed specifically for dentists and the amount you can borrow is lesser than the loan for doctors.
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Eligibility criteria for medical equipment loans
The eligibility criteria for companies and individuals seeking a medical equipment loans is:
- Individuals need to have a minimum qualification of MBBS or BDS.
- Doctors specialising in Homeopathic, Unani and Ayurvedic medicine can also apply for this loan.
- The age limit for individuals applying for the loan is defined as being in the range of 25 years and 65 years though this may differ from one bank to the next.
- If a company is applying for this loan then the promoters of said company should have a minimum qualification of MBBS or BDS.
- Certain banks may also require that the applicants be members of councils.
- The credit history of individuals applying for the loan needs to be spotless. They should not be considered defaulters by any bank. If there are co-applicants for the loan then their credit history too must be completely clean.
- Some banks may also require that you should have been residing at your current address or have had you current office for about 5 years.
- They may also require that you have a minimum of 3 years of experience in running a medical facility.
To be able to take this loan, you will need to provide certain documents to the bank. These documents may be different for each bank but some of the common ones are:
- KYC (Know your customer) documents will be required in the case of individuals.
- Some banks, like HDFC, might require that you submit bank statements for the last 12 months.
- You may also have to provide the payment details of any loan that you have paid back over a period of 12 months or more.
- In case of individuals and companies banks may require your ITR documents for the last 3 years.
- In case of private limited companies an MOU or the deed of partnership may also be required.
There may be a possibility of the bank requiring you to submit
Interest rates for medical equipment loans
Most banks offer a fixed rate of interest on the loans that are slightly above their base lending rates. This means that the interest rates can be as low as 12% per annum. However some banks even offer interest rates that are charged based on a monthly reducing balance which means that the interest you have to pay reduces as you pay the loan back.
Features and benefits of medical equipment loans
- These loans can be taken from banks and non-banking finance companies.
- Since medical equipment can be very expensive, these loans offer very high limits. Individuals can borrow as much as Rs. 2 crore and companies even more.
- Some times the amount that you can borrow may also be dictated by the city you are in. This means that if you are in a metro city then you can borrow the most as compared to other cities though this feature may be available only to companies.
- The general repayment period for these loans can go up to a maximum of 7 years with some banks offering repayment periods slight higher than that.
- Banks may also charge you a processing fee for the loan which tends to be 1% to 2.5% of the loan amount. The processing fee depends on the bank that you take the loan from.
- With online banking becoming more and more popular, many of the banks allow for applications for these loans to be submitted online.
- Some banks like Punjab National Bank are even offering a 20% discount on the up-front fee if the application is submitted online.
- In the case of some banks, the time that it takes to issue the funds will depend on the amount you want to borrow. The higher the amount the longer it takes to dispense the funds though it should not take longer than 6 weeks.
- While providing a collateral is not mandatory, banks may ask for it if your loan amount exceeds a limit set by them. In some cases there may even be a requirement for you to have a guarantor for the loan.
- Banks may have margins that you will have to pay. In the case of some banks like Bank of Baroda, there may be a margin of 25% applied in case the collateral you provide is not enough to cover the loan you take.
- This loan is not just restricted to hospitals or doctors. It can also be taken by medicals labs, diagnostic centres, nursing homes, speciality clinics, etc.
- Some lenders may allow you to pay the loan back early without charging you a prepayment fee.
Other loans for the healthcare industry
Loans for medical equipment is just one aspect of the loans provided for the healthcare industry. Some of the other loans provided are:
- Infrastructure loan
This is a loan that can be taken help pay for the construction of a hospital or the premises of clinic or any other facility engaged in health services.
- Working capital finance
This is a loan that can be taken to ensure that you have funds to conduct your daily business and can be taken as a cash advance or as an overdraft.
- Merchant establishment loan
This too is a form of Working Capital Loan which can be taken against the credit card swipes every month.
Q. Will I have to open an account with the bank to get this loan?
A. That is a matter of bank policy and some banks may require you to open an account with them to take this loan.
Q. How much of the required amount will I get?
A. Most of the times you may not get cover for the entire amount but you will still get a percentage of what you need for the entire project.
Q. Will I get the money in a lump sum?
A. While some banks may provide the funds in a lump sums other banks offer it in instalments to pay for expenses as they come.
Q. How do I pay the loan back?
A. The loans can be paid back via post-dated cheques, electronic clearance or standing instructions.
Q. Do these loans come with letters of credit?
A. Letters of credit are subject to the bank's policies however there are some banks that do offer them with the loan.
Q. What if my credit history is not good? Will I still get the loan?
A. No. Most of the banks insist that you and the co-applicants for the loan have no defaults in the credit history.
Q. What if I want to take the loan for longer than 7 years; can I do that?
A. Yes. Some banks offer tenures of 10 years too. You can approach them for the loan.
Q. Is it necessary for me to have a guarantor?
A. No. The need for a guarantor is determined based on the amount you want to borrow and the bank's policy.
Let us suppose that you are interest in a medical equipment loan and approach HDFC for said loan. Here is what you can expect out of the loan:
Features of the HDFC medical equipment loan
- The loan is available to doctors, dentists and companies alike.
- With the HDFC medical equipment loan you can get help with finance for working capital and construction of the facilities too,
- HDFC allows for balance transfers which means that you can transfer the balance of a similar loan from another bank to HDFC.
To be eligible for the HDFC medical equipment loan you will need to:
- Have a minimum qualification of MBBS or BDS.
- You or your intended establishment will have to be a part of the healthcare industry in terms of being a doctor or a nursing home, pathology lab, diagnostic centre, etc.
- Have stayed in your current house, or worked out of your current office, for a minimum of 3 to 5 years.
- Have experience in running a medical establishment and this experience needs to be of at least 3 years.
- Have a record of having repaid a loan that lasted more than 1 year.
- Have a credit history that is free of any defaults. This applies to the co-applicants of the loans as well.
- You will need to provide bank statement of the previous 12 months for a bank that you use for the bulk of your transactions.
- You will also have to submit KYC documents.
- Project reports to provide banks with the details of the funding requirements.
- 3 years of ITR documents and balance sheets if applicants are promoters.
The amount that you can borrow will depend on the document you submit. This means that you may not receive 100% funding but you will still may get 80% of the funds as indicated by the projections for the project.