Professional Loans

Professional loans are a broad category that includes different types of small business financing, such as a line of credit, that could be used by professional services providers or professional services firms.

Professional loans could provide access to working capital, help address cash flow concerns, assist with hiring staff, or enable the purchase or lease of equipment, among other possibilities.

While doctors, attorneys, and CPAs may be the obvious examples of professional services providers, there are also many other types of professionals who may be eligible for this type of business loan. Other examples include architects, dentists, psychologists, ad agencies, marketing firms, cybersecurity experts, and business consultants.

Is a professional loan secured or unsecured?

A professional loan may be secured or unsecured, depending on the type of financing.

To obtain a secured loan, the borrower specifies an asset, such as a residence, to be used as collateral to secure the loan. If a secured loan isn't repaid, the lender has the right to make a claim to the asset in lieu of repayment. The advantage for the borrower is that a secured loan typically involves a slightly lower interest rate.

For an unsecured professional loan, lenders typically look for borrowers that have a higher credit score and ask them to provide a personal guarantee. An unsecured loan also typically has a higher interest rate than a secured loan but doesn't require collateral.

When should I get a professional loan?

When professionals leave the corporate and hospital workforces to start their own businesses, getting access to extra working capital is important to ensure their businesses stay on track and continue to grow. With working capital on hand, business owners have financial flexibility to cover business expenses, such as the following:

• Expanding the practice by hiring staff
• Upgrading equipment and software
• Covering gaps in cash flow due to slow reimbursement or client payment

Alternatives to traditional professional loans

Because many lenders may require a personal guarantee for a professional loan, the risk of applying for a loan increases. Traditional lenders typically require extensive credit and financial documentation as well, and their approval processes are lengthy. Even if an application is approved, it may take days to get the business loan that's needed — and an opportunity could be gone by then. Loan features and approval times will vary by lender, so it's important that business owners find the financing option that works best for their needs.

An American Express Business® Line of Credit could help small business owners get working capital that could be used for such expenses, such as hiring and training employees, purchasing equipment, and addressing gaps in cash flow. The application is designed to be fast, simple, and fully automated.

Note that the American Express Business Line of Credit may have different eligibility criteria, terms and features from the lending products that are discussed above in this article.