Doctors aren’t immune from cash flow problems for a variety of reasons. For starters, 20% of Americans simply don’t have enough money to pay their medical bills, according to the Centers for Disease Control. How can doctors expect to have money if they’re not getting paid for their services?
Beyond that, doctors have to spend a lot of money buying equipment and supplies—not to mention the various types of insurance they have to carry. And who knows? There’s always the lurking possibility that a disgruntled patient will decide to file a lawsuit. Even if you’ve done nothing wrong, you’ll have to cover legal fees.
Like any other business owner, physicians need access to cash to keep their doors open. You can’t expect your medical assistants and clerical staff to stick around if you’re not able to make payroll. And utility companies aren’t exactly thrilled by the idea of customers routinely struggling to pay their bills on time. Landlords aren’t either.
Luckily, physicians struggling with cash flow problems aren’t completely out of luck. If they don’t have the time or patience required to secure a loan through a traditional financial institution or the Small Business Administration, they can turn to alternative lenders to plug cash gaps. Some of these alternative financial vehicles—like working capital loans—require physicians to take on debt. But when given the option, many of them are hesitant to do so.
To get the money they need to grow their practices without incurring debt, many physicians are turning to invoice factoring, the process in which accounts receivables are sold to a third party that generally pays somewhere in the neighborhood of 80% of the total sum. While factoring can be expensive, accounts receivables that are collecting dust aren’t particularly useful. It’s not like you can pay your staff with them.
If your physician’s practice is struggling with cash flow, invoice factoring may be precisely what you’re looking for. The benefits speak for themselves:
- You get cash quickly. It can take as long as 60-90 days to secure a loan through a bank. Once you’re approved for invoice factoring, funds appear in your bank account within a few business days.
- You don’t have to waste time trying to collect from customers. Instead of having your employees spend their time tracking down customers and following up with them about where their payments are, they can spend their time on other important business endeavors—like trying to attract new customers.
- You don’t have to put up any collateral or take on any debt. Because you’re selling assets, you don’t have to worry about taking on any debt. Sure, you will lose out on some of your income. But who knows if your customers were planning to pay you anytime soon—if they were planning to pay you at all.
- You can invest funds to grow your business. Once you decide to move forward with factoring, money will be in your account shortly. That means you won’t have to wait forever to invest the funds as you see fit.
- You can get a lot of money. Today, banks are much more hesitant to lend money to small businesses. And if your practice did qualify for a loan, odds are it might not be as lucrative as you hoped. Assuming you’re sitting on a huge pile of receivables, chances are you’ll get a lot more money from a factoring company than you’d get from a traditional loan.
If you need money to keep your practice afloat, it may be time for you to give invoice factoring a try. Yes, you’ll have to forego a portion of your receipts. But if your choice is between factoring and shutting your doors for good, is that really so bad of an option?
Thanks to small business loan comparison services, it’s easier than ever for doctors to find the funding they need to grow their practices. You can search a ton of factoring companies at once to find the most favorable rates. If you have cash flow problems—or anticipate them rearing their ugly heads in the future—take a look at invoice factoring. It may be the game-changing financial vehicle you’re looking for.