If you’re looking at options for managing your practice’s cash flow, there are quite a few out there. Sometimes, it even helps to mix them, using specific financial solutions where they make the most sense. If you have a good strategy, this can save you a lot on financing costs. One of the key points to understand is the structural difference between your choices because it can help you decide which product fits in each situation. Medical financing on a factoring model and doctor loans are both sound choices, but they have very different cost structures, as well as different limits.
Doctor loans are simple loans, usually unsecured, meaning the loan balance is paid at the time of borrowing and then monthly payments are made until the balance is repaid. They can be structured in many ways, with terms that usually range up to five years. Occasionally, longer terms can be found. Credit lines for doctors also count as doctor loans, and they are reusable. Whether it’s a term loan or credit line, there is a maximum limit one can borrow. It differs from practitioner to practitioner according to training, years in business, and demonstrations of income and financial health. Medical financing works quite a bit differently.
When you factor your outstanding invoices, you are borrowing against money you are owed, so it’s really like your patients’ insurance companies are borrowing money in terms of whose credit matters for repayment risk. The fee structures tend to be less based on term interest rates and more fee-oriented, with different fee structures according to the terms set for the advance. Under most agreements, you finance your outstanding invoices and get a percentage of them as an advance. The exact percentage is based on the actuarial estimate of the invoices’ length of time to repayment and the financial health of the insurers you work with.
Once that amount has been agreed to, the fees are based on those estimates too. Often, there are penalty fees if payment takes longer, but if you look for other options you can find flat-rate financing that offers a savings if you think an invoice might come later and not sooner. Medical financing can also be found for individual invoices or selections, so you don’t always have to finance everything at once. It takes time to find providers for every option, but when you do you will have a lot of range in your choice of cash flow management tools.
