Comparing Physician Loans and Medical Factoring

Every industry has its own unique forms of financing designed to work with the common business models used across its various niches. For medical businesses like a physician’s practice, those products primarily take the form of doctor’s loans and factoring. Loans aimed at physicians often provide more generous interest rates with lower collateral requirements than in other businesses, with more flexibility about how the capital is used. As such, they can be used to consolidate other debts or to manage cash flow. Factoring your invoices to insurance companies or patient copay accounts can also provide capital for cash flow management. So what are the advantages of each form of medical financing?

Physician’s Loans

These loans are typically working capital loans, meaning they are not tied to a particular asset purchase, allowing you to use the funds as needed to support your business. This makes it easy to access funds to cover supply orders or even new equipment purchases up to the loan maximum. Loans are typically based on the performance of the practice and its overall financial health, with terms that range between two and seven years being quite common. They can be structured as secured or unsecured debt, with the collateral for secured loans coming from business assets like equipment or real estate equity. Typically, these working capital loans are less expensive than general business credit lines or hard money loans because they are strictly for medical financing, which has a risk profile unlike most other industries.

Medical Factoring Services

Often, medical factoring is a more attractive option for general cash flow management. While loans aimed at physicians and practices are built with attractive terms, factoring allows the practice to move on from old insurance filings and patient invoices to focus on the billing paperwork for the day’s business. The costs of factoring go down with the scale of your financing efforts, so making a practice of factoring out all your outstanding invoices every 30 to 60 days can decrease the fees involved, getting you a higher percentage of the face value of each invoice.

As a medical financing service, factoring is invaluable for its ability to streamline cash flow with a predictable fee structure you can figure into your quotes for services when setting prices. Make your practice independent of the insurance industry’s payment practices by selling your invoices to a factor who can worry about collecting copays and insurance payments alike so you can focus on treating your patients.