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Medical Professional Working Capital: Operating Capital For Doctors Offices

Physician Operating Capital

A trip to the doctor’s office, more often then none is not desirable. Usually, you have to commute, check in for your appointment, then wait (typically longer than your actual visit ends up being), then get through slow procedures followed by instructions administered with little to no follow up–all as a result of the existing antiquated systems. However, as advanced technology is emerging, a trip to the doctor’s office is new and improved, and visits are like never before. Therefore, with the demand for more convenient and personal medical appointments, technology companies are finding new ways to rise to the occasion and are making a substantial profit along the way.

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Industry Overview

One organization in particular—the Dallas-Fort Worth Hospital Council is home to 10 active healthcare systems, in which all are competing to provide the best quality of care, reduce operating cost and meet consumer expectations. It is also known for its nationally renowned healthcare resources and medical facilities. Though, Baylor Scott & White, another leading healthcare organization, managed to start the trend with their development team to help modernize the patient experience. They have rolled out such products like MyBSWHealth, an online portal and mobile application that allows for patients to access their medical information, appointments, and payments from any device. Additionally, their team has also begun to drive out remote monitoring solutions and virtual care on-demand. Further, Dallas-based Children’s Health has joined the trend and has made an effort to create innovative healthcare. Recently, they have created an investment arm, Children’s Ventures, and hired an expert in telehealth. The program has been introduced to over 100 schools in North Texas, and with help from technology-driven brand Family Health and Dallas startup Mend, they have begun to offer sensor-equipped pills and adopted a data analytics platform taken from Pieces Technology of Dallas. We also have people like Erick Rock, an entrepreneur that developed software—MEDHOST, which built touchscreen management software for the ER that are contributing to advanced medical services.

Thus pick any medical issue, that being diabetes or heart failure and you will find researchers working on ways to solve it with new and remarkable technologies. Some areas targeted include heart failure, which is Medicare’s most costly diagnosis. Therefore, institutes are investing in wristband sensors that give both the patient and the care team continuous data on how a compromised heart is functioning. Making it easier for medications to be adjusted and for dietary recommendations made that are specific to the individual patient. The sensors replace the once-daily routines, such as the measure of heart function or measuring a patient’s weight for signs of water retention. And with the ability to track a patient’s movements, it helps providers determine how environmental and social factors affect his or her health. By analyzing a patient’s daily routine, it makes it easier for medical professionals to gain insight into the patient’s well-being. Additionally, we have sensors put into pills that are digestible to measure when a patient is taking them. The chip then uses gastric fluids as a power source that turns on once it reaches the stomach. The sensor then transmits the specific medication and time it takes to a skin patch that sends info to an app forwarded straight to the patient’s mobile device. It also detects and transmits rest, activity, and heart rate.

Furthermore, having a timely diagnostic’s is desirable for the patient and the practicing practitioners. The test can be expensive and time-consuming as they also have to be done one by one. Thus a nonprofit organization called the XPrize Foundation is holding a competition to find solutions for quicker diagnosis. Each finalist must be able to identify and diagnose up to 15 conditions varying from AIDS, stroke, pertussis, and chronic obstructive pulmonary disease. We also have the remarkable 3-D printing that came to the market not too long ago in which these day’s medical researchers are building on its potential to improve patient care. For example, Kaiser Permanente’s Los Angeles Medical Center is working on perfecting the use of 3-D printers that would produce exact multidimensional models of trouble spots inside patients. Surgeons then would beadle to scrutinize and handle the models and simulate the possible procedures before even entering into an operating room.

Hence, what can be observed from the many technological trends discussed above is that most are aimed at getting inside the body, yet not actually going inside it and creating techniques and procedures that differ across individual patients to provide the best care and services possible. So with organizations like Dallas-Fort Worth Hospital Council that are leading in developing progressive, fascinating, and efficient services these trends will continue to enhance the patient’s experiences.

Types of Medical Practice Working Capital Loans

There is no shortage of working capital solutions for medical doctors, dentists, chiropractors, and other medical professionals. The financing products can range from being inexpensive, to being extremely costly. Making sure you know your options is the key to finding the right working capital loan for your practice. Below we’ll take a look at some of the top financing products available.

Bank Working Capital Loans

This type of loan is the most prevalent of all the financing options available for medical professionals seeking a business loan to start a practice, or a lending option for an existing practice. Bank term loans can be used for just about any business use, including working capital, commercial real estate purchase, refinancing business loans, consolidating business debt and other operational uses. Bank term loans are the most sought-after financing tool because they clearly the cheapest form of borrowing among all commercial financing options for medical professionals. But in order to qualify for a bank loan, the medical professional office needs to have fantastic credit, be able to show the ability to service the debt and provide collateral to reduce the lender’s risk should the medical office fail to repay the loan.

Rates 5-15%
Terms 1-30 years
Funding Amounts $50,000-$5,000,000
Collateral Required
Fees Medium costs


Medical Line of Credit

Another affordable financing option for medical practices looking for working capital financing is a line of credit. A medical office line of credit from a conventional business lender offers convenience to the medical practice because they have access to capital whenever they need to use it, without having to seek additional approval from the lender. The overall financing facility is approved beforehand, and the medical professional can then draw any amount they need (up to a max amount) and only pay interest on the amount they use. Commonly, a bank line of credit for medical office practices requires fantastic credit and exhibit good cash-flow..

Rates 7-15%
Terms 1-2 years
Funding Amounts $10,000-$5,000,000
Collateral  May be Required
Fees Medium costs


Medical SBA Working Capital

If you’re a medical office and have not been successful obtaining a medical office loan through your local commercial bank, another way to obtain similar type bank-rates and terms is to seek a working capital loan using the Small Business Administration’s loan guarantee program. The SBA loan program works by having the U.S. government agree to cover any losses a lender should incur for any loan that meets the SBA’s criteria – which leads to a SBA enhancement. Once the SBA enhancement is issued, the government agrees to cover up to 90% of the lender’s losses should the medical practice fail to repay their SBA working capital loan.

Rates 5-8%
Terms 3-25 years
Funding Amounts $50,000-$5,000,000
Collateral Required
Fees Medium costs


Medical Asset Based Working Capital

A medical practice asset-based loan is a great financing option for medical practices seeking working capital, have plenty of assets on their balance sheet that they could use as collateral, but can’t get approved for conventional lending. While not all assets can be collateralized for an ABL loan or line of credit, acceptable forms of collateral include commercial real estate, personal real estate, investment real estate, accounts receivable, and sometimes equipment & machinery. Even with the collateral being pledged, the lenders are exposed to increased risk because an asset-based loan is in itself a riskier loan for the lender.

Rates 7-25%
Terms 1-5 years
Funding Amounts $50,000-$500,000
Collateral May not be required
Fees Medium costs


Medical Unsecured Line of Credit

This can be a useful financing tool for doctors and medical professionals in need of unsecured working capital. The key is that to qualify for an unsecured line of credit, the medical practice owner must have fantastic credit, often with a minimum FICO score of 700+. But if the medical practice can get approved for an unsecured line of credit, they could potentially receive as low rates as 0% APR for the first 12 months. Unsecured lines are generally used for working capital purposes but have even been used to consolidate debt like merchant cash advances.

Rates 0% APR for 12 months
Terms 1-3 years
Funding Amounts $10,000-$500,000
Collateral Not required
Fees Medium costs


Medical Factoring

Sometimes more conventional forms of working capital financing aren’t available to a medical practice owner, so an alternative way of obtaining working capital is to sell accounts receivable. By selling AR or invoices, a medical office can obtain an upfront portion of the invoices value (minus a fee that will go to the factoring company to provide the financing) and then obtain the remaining balance of the invoice’s value once the 3rd party has paid the invoice.

Rates 1-3%
Terms 30-90 days
Funding Amounts $10,000-$1,000,000
Collateral Required
Fees Medium costs


Medical ACH Cash Advance

If a medical professional has been unable to obtain working capital for their practice from both conventional and alternative business lenders, another option could be to get a cash advance. Cash advances aren’t high risk loans, but the sale of the medical practice’s future revenue to a factoring company (at a discount to the funder). These are generally a form of high-risk financing, therefore the rates for cash advances can be steep, and the terms are never longer than two years (often less than a single year). To qualify, the merchant cash advance funder will analyze the business’s cash-flow through their main operating bank account, and then purchase up to 150% of an average month’s revenue. Once funding is complete, the medical professional’s business will then send a set amount to the funding company each business day until the cash advance is repaid.

Rates 1.10 – 1.50
Terms 3-18 months
Funding Amounts $10,000-$500,000
Collateral Not required
Fees Medium costs


Medical MCA Advance

This is a similar high risk working capital financing product to the ACH cash advance, in that it is also the sale of future medical practice receivables. The main difference between the two is how repayment is made to the funding company. As mentioned, when an ACH funder is repaid, the amount of the daily repayments is a set amount. With MCA split funding working capital, the repayment amount isn’t a set amount at all, but instead is a portion of daily sales using the company’s merchant processing account. Since a percentage of the sales are sent to the funder by the credit card processor, on days when the medical office has less sales, the payment to the funding company will be less, too.

Factor rates 1.10 – 1.50
Terms 3-24 months
Funding Amounts $5,000-$2,000,000
Collateral Not required
Fees Low to High costs


Medical Office Real Estate Loans

There are a few reasons why a medical professional may seek a commercial real estate loan for their practice, primarily they’re looking to purchase the real estate they already use, looking to refinance a mortgage they already have, or are looking to cash-out building equity for working capital. There are a number of financing products available for medical professionals seeking commercial real estate financing, including the SBA 7(a) program, SBA 504 program, hard money real estate loans, and institutional investor loans.

Factor rates 5-12%
Terms 1-25 years
Funding Amounts $100,000-$10,000,000
Collateral Required
Fees Low to High costs


Medical professionals have plenty of financing products available to help with working capital. The key is to find the best possible product as it will save you money and will help avoid putting stress on your medical practice. If you are a medical professional seeking working capital to help bridge gaps in revenue, please reach-out to one of our medical working capital experts, and they’ll help you navigate the process.

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About the author
Domonique Cox

Domonique is a Minnesota native that earned her bachelors from The University of Arizona with a degree in English and Film Studies. Though books and writing are not her only interest, you can find her engaging in nutritional sciences, environmentalism, vegan cuisine, filmmaking, old school dancing, tennis, running, sound engineering, and enjoying satirical dark comedies or listening to the poetic lyrics of Bob Dylan. She is now based in Los Angeles as a content writer for GUD Capital where she spends her spare time honing her writing and directing skills. 

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