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Doctor Loan vs Medical Factoring – Which is Best for Your Practice?

Doctor Loan vs Medical Factoring – Which is Best for Your Practice?

It can be challenging for medical practices of any size to maintain a steady cash flow, but it can be particularly difficult for smaller practices looking to grow. While patient co-pays may cover daily operations, there often isn’t much left over to invest in growth. Waiting months for payments from the insurance companies can leave a small practice with very little working capital. Fortunately, there are various funding options available. Some are specifically geared toward medical practices such as doctor loans and medical factoring, but how do you decide which is the best solution to achieve the goals you’ve set for your practice? When trying to choose between the two options, it helps to understand the difference between a doctor loan and medical factoring.

 Medical Factoring

Doctor Loan

A doctor loan, sometimes called a physician loan, is a funding option offered by many traditional financial institutions. There are a couple of different types of doctor loans. The first is a structured loan. This type of doctor loan provides the full amount applied for if approved and requires equal monthly payments. Some financial institutions also offer doctor loans that are structured like a line of credit. This provides doctors with access to cash as they need it with payment terms similar to that of a credit card.

These loans can be beneficial when you’re trying to grow your practice or when experiencing a shortfall in working capital. Doctor loans are typically subject to a maximum cap. This cap varies depending on the number of years you were in training and how many you’ve been in practice. Some institutions may take your specialty into consideration as well. 

Medical Factoring

Medical factoring is a form of invoice factoring geared toward the medical profession. It is designed to alleviate stress and cash flow inconsistencies caused by the slow payment of insurance claims. Medical factoring provides practices an advance on those claims, improving your cash flow and allowing you to do more than just cover daily operating expenses. Because factoring is structured differently than a doctor loan, you may be wondering how it works.

Having the insurance company approve claims and determine how much they will pay is only half the battle. You can still wait for months to receive payment. With medical factoring, you sell unpaid, approved claims to a factoring provider for a percentage of their net value, normally between 70 to 90%. Payments of those claims are then paid to the factoring provider. On the claims have been paid the factoring provider will send you the balance of those claims minus a small fee. Like doctor loans, medical factoring usually has a maximum cap. This is based on the amount you bill monthly and is structured to increase automatically as your practice grows

How Do You Choose?

Doctor loans and medical factoring can both eliminate the stress and inconsistencies in cash flow caused by the slow payment of insurance claims. So, how do you decide? Ultimately the choice is up to you but here are some things to consider.

If you need funding to cover a smaller, one-time expense, say $100,000 or less, you may be better off securing a doctor loan. This type of funding is better suited to practice expansions or equipment upgrades. It’s not the best choice to generate revenue from unpaid insurance claims. 

Medical factoring can be the most effective funding option for cash flow issues caused by the slow payment of medical insurance claims. Factoring allows you to receive a majority of that revenue in advance without taking on additional debt.

loans for medical doctors

Medical Factoring with CapFlow Funding Group

Still not sure which is the best choice for your practice? Then it’s time to consult with business funding professionals. CapFlow Funding Group specializes in factoring for a wide variety of industries including medical practices and healthcare facilities. We will work with you to find the best funding solution to provide your business with immediate working capital. We service many different industries with a variety of different funding needs. Contact us today and find out how invoice factoring can help grow your small business.


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