The Difference Between Doctor Loans and Medical Receivables Factoring
Health care financing is a complex field, and there are new products being developed to service the unique needs of the medical industry every day. It’s no wonder that many doctors have trouble keeping up with their options, but it’s important that you work with financial advisors and lenders who connect you to those new products and make understanding how they work accessible. That way, you always know you have the tools you need. One area where many professionals falter is understanding the difference between practice loans or doctor loans and factoring for medical businesses.
Practice loans typically provide flexible working capital doctors can use for any need they have at their practice. You can apply for one and then break up the funds between supplies, new equipment, and consolidating debt to streamline your outgoing payments. They are amortizing products, typically fixed-rate, and the average loan has terms of 48-84 months, with many providers aiming at the 72-month window. It’s regular debt, just like any other loan would be, so it impacts your credit rating both when you are granted the loan and as you pay it off.
Medical receivables factoring, on the other hand, is a form of health care financing that allows you to get a cash advance against money you’re already owed. For many doctors, it’s preferable to a practice loan because it allows them the option of avoiding the addition of long-term debt to the practice. It’s a great way to access the money you’ve already earned when you are still waiting for insurance payouts and patient payments.
Factoring is not always the answer, but when you need short-term working capital for cash flow, it’s typically preferable to a new loan. If you use factoring when it’s the right tool for the job, you also get the benefit of being able to save those other credit resources for other needs like debt consolidation or new equipment purchases, giving you a better balance of resources to use when managing your company’s growth.
Don’t let yourself get confused by your health care financing options. Find a lender who can advise you about the best products available to meet your goals and stay on top of new options for financing your needs as your practice develops. The right lender can even help you finance the acquisition of other practices if you grow enough to absorb or merge with another existing practice.
