One of the greatest benefits of being a medical practitioner and doctor is that you generally have good financial options. You have many options to choose from if you are facing cash flow problems. Such solutions are conventional loans, doctor loans, medical factoring, or an SBA loan.
The option you select depends on the kind of problem and how severe it is how much cash you require and how fast do you need these funds. In this article, we will be discussing the difference between medical factoring vs doctor loans, and to understand this we must know the meaning and terms of both these financial options.
WHAT IS A DOCTOR LOAN?
A doctor loan is also known as a physician loan. It is the kind of loan that is provided by many financial institutions and banks. These loans are specifically provided to doctors and are structured as term loans. You pay back monthly, and the institution provides you the full borrowed amount.
There are a few loans that are structured in a way where you are allowed to borrow and pay back as it is required depending on the lines of credit. Doctors who are just beginning new, or growing to practice on their own, or are experiencing certain cash flow problems find these kinds of loans highly attractive as they solve their problems quite easily.
Doctor loans tend to have a maximum cap. The cap is the number of years you have trained, your specialty and the number of years you have practicing for.
WHAT IS MEDICAL FACTORING?
Medical factoring, on the other hand, guides the medical companies that bill private insurance companies like Medicaid and Medicare that have problems with the cash flow mainly because of delayed and slow payments. This variety of financing is usually used by medical competent and healthcare suppliers.
The lengthy hold up between when the facilities are delivered and when the payment of the bills is done can create enormous problems with the cash flow for suppliers and providers. Medical factoring deals with this problem by offering the healthcare providers with the avenue to cash immediately for invoices that are yet to be paid by Medicaid, Medicare or other independent insurance companies.
Vendors and Providers are the two types of medical companies that profit from medical factoring. Vendors are any person or company that designs, develops, sells, and/or supports goods or services such as apparatus, medical personnel, transcription of documents and paperwork services, shipping services, etc.
Providers are individuals or institutions that aid health care services like therapists, dentists, physicians, nursing, pharmacy, etc. Providers typically invoice third-party payers like insurance companies. Medical factoring is excellent for both vendors and providers because these types of working fields have the character of working with credibility and trustworthy, but clients that pay slowly.
MEDICAL FACTORING V/S DOCTOR LOAN
Both medical factoring and doctor loans solve the issue of cash flow problems. It is pointed out by COBS (capital one spark business) in a survey that at least 70% of doctors and physicians deal with cash flow and the reimbursement for the patient care as their biggest concern in 2017. This is only a common connection between doctor loans and medical factoring.
In medical factoring, where the main aim is to address and solve issues related to medical insurance cash flow. Whereas, doctor loans provide services to a wider range of purposes like working capital, funding education, and practice expansion.
FUNDS FOR EDUCATION
Physicians and doctors can use doctor loans to finance their higher education. Getting an MD or MS degree from a private university and institute can be an extremely expensive affair in both India and a foreign country. The fee structure is skyrocketing.
A doctor loan becomes a key tool to provide financial support here. Bajaj provides two loans that can be used for higher education. There are personal loans for doctors that give funding up to 30 lakhs rupees and loans against property provide doctors funds that can go up to 2 crores in rupees. These kinds of loans provide a large loan amount than a regular bank education loan.
GROWTH AND EXPANSION
There is an estimation that 600 million people in India have very little or simply no access to health care and medical care, since being in the rural area. Providing medical and healthcare facilities and services in such distant areas requires growth that requires purchasing instruments, setting up the infrastructure, hiring staff and employees, finding the growing technology, and more.
A doctor loan in a flexi structure goes a long way in these difficult times to fund this expansion and growth. It satisfies business growth and the requirements of the medical doctors and practitioners. Loans like these allow doctors to have full access to the money or in parts depending on their needs and pay back the interest as EMI.
Many times a doctor loan is a one-time loan and you can pay back every month. Doctors with great experience and established practices can take out a big doctor’s loan than a small one. Doctors that specialize in a specific area usually have an advantage and benefit when it comes to receiving a loan.
On the other hand, medical factoring gives an advance on the cash that’s already owed to your practice. This becomes important because this gives a guarantee that you don’t have to wait 30-120 days to get your payment from the insurance firms.
Many entities would find it tough to remain in such an operation that takes a long time between caring and treating a patient and getting paid for the visit.
Both medical factoring and doctor loan have advantages and limitations. So there is no good answer to know which option is better than the other. A decision can only be made based on the kind of situation you are in. Medical factoring will be a better option if you are having cash- flow issues due to slow-paying insurance claims and invoices. A doctor loan is a better option if you need cash to solve a one-time issue.
Both doctor loans and medical factoring are beneficial ways to get finance for your medical practice. There are similarities and difference between medical factoring vs doctor loans.