One of the benefits of being a doctor is that when your practice needs money, there are a number of options for medical industry financing which are available to you. Two of the most common alternatives are physician’s loans and medical factoring, and this article will describe the differences between the two financing options.
Medical factoring is a financing option made available by alternative lenders, which is used for helping those healthcare practices experiencing cash flow issues, generally due to slow-paying clients and insurance carriers. Through factoring, your practice can obtain cash advances against those slow-paying claims, so that you’re able to cover day-to-day expenses. When a specific health practice engages in medical factoring, the amount of cash advance varies each month, right along with the total amount of insurance claims for that month.
In this form of medical industry financing, an alternative lender would provide an upfront sum of cash which is generally equal to about 80% of the value of unpaid insurance claims for that time frame, and then the lender would be responsible for collecting the claim amounts. After those amounts have been paid, the other 20% of the claim amount would be remitted to the medical practice, after subtracting out the factoring fee.
Many banks and other lending institutions offer physician’s loans, which are financial products offered specifically to doctors, and which are generally structured as a term loan. The full amount of the loan is provided to the medical practice, after which that practice makes monthly payments to continue bringing down the balance over a period of time. In some cases however, loans are structured as lines of credit which allow the medical practice to use any amount up to the limit, and then pay it back monthly to work on restoring the balance.
Physician’s loans are generally very attractive to doctors who are just starting out in their practice, and who are experiencing cash flow issues. The maximum amount which any practice is able to borrow in a physician’s loan is generally determined by a number of factors such as the number of years you’ve had in training, the number of years you’ve been practicing, and your medical specialty.
Factoring with Bear River Financial
If you think your practice would benefit from medical factoring, we’d like to hear from you. Contact us at Bear River Financial, and we’ll be glad to answer any inquiries you may have about medical industry financing, and to work with you toward making that happen.