More Physicians taking to Merchant Loans

More Physicians are taking to merchant loans for financing for their practice. This must be considered a barometer with regard to financing in the medical industry. An increasing number of medical practices, both Physicians and Dentists turning to these methods of financing may be a cause for alarm.

The short term gain is the cash flow the practice needs. However, with an average repay term of only 6-9 months, the repayment schedule's negative impact on the Practice's monthly cash flow may make the disadvantages outweigh the advantages for some practices. Careful consideration to the impact on monthly cash flow must take place.

10 to 20 years ago, physicians, including Dentists remained in traditional financing programs, primarily at banks. The ever increasing financial challenges of Insurance reimbursement rates and insurance premiums erode the net profits of Medical practices. The trend is sure to continue as insurance liability rates do not appear to be leveling off to the level of inflation. The trend in recent years has been for reimbursement rates to decrease, rather than increase, so the trends are not in favor of the Physicians in this regard as well.

Physicians increase use of Alternative loans

Secured asset based loans on equipment, and unsecured funding based on Gross sales are two of the most recently used alternative funding options employed by Physicians.

For the reasons cited in recent posts, Physicians continue to increase their usage of alternative loan products. Continued escalating malpractice insurance premiums and the constant threat of permanently cutting Medicare Reimbursement rates have forced many Physicians, Dentists and Chiropractors to seek alternative financing.

Since almost all business have sales, financing based on the Gross Sales of the business has become increasingly popular. One additional reason for this is that Physicians often initially begin or further their practice through SBA Loans. SBA Loans often require the Physician to sign over all assets, furniture and fixtures of the practice. This make it difficult or impossible for the practice to obtain financing or working capital when they have future needs and requests.

Increases in these alternative funding programs will be more closely looked at in the future.