Payroll funding solutions for healthcare businesses – How to hit payroll on time
As a healthcare business owner, you face unique payroll challenges. To surmount them, you need long-term payroll financing solutions without long-term debt.
For healthcare businesses, the consequences of missing payroll are steep. Top-quality, truly caring healthcare workers are in high demand and hard to come by, and even one staff member who leaves because of payroll issues is one too many.
What can medical and healthcare practices do to ensure smooth, stress-free payroll — without the burden of long-term debt?
In this article we’ll talk about:
- Why healthcare businesses face unique payroll challenges
- How a business line of credit can help and
- How to prepare your business for approval
- Other unique payroll financing options available to medical practices (beyond a business LOC)
Why as a healthcare businesses, you might struggle to meet payroll
Your healthcare business — like NPOs — relies heavily on payouts from outside, often federal organizations. Payouts from Medicare and Medicaid are slow, and private insurance companies aren’t always faster. Other complicating factors include changes in minimum wage requirements and fluctuating labor and equipment costs.
None of these factors are related to your business’s success, yet they all create problems when you need to pay employees on time.
One solution is a business line of credit.
Read more about business lines of credit and how they work →
How can healthcare businesses qualify for a business line of credit?
There are three major eligibility requirements your healthcare business or medical practice needs to meet:
- Strong credit history. You need to show that your business pays credit card bills and loan payments on time.
- Length of time in business. The older your healthcare business is, the more stable lenders consider it to be. The standard minimum is usually two years.
- Organized revenue and financial statements. Invoices, receipts, payroll records, bank statements and other financials need to be complete and in order, so you can show lenders your business is functioning smoothly.
So if my healthcare business meets these criteria, I’ll qualify for a business line of credit?
Not necessarily. There are other reasons lenders might deny healthcare professionals a business line of credit:
You’re registered as an NPO, not an LLC. If you’re registered as a non-profit organization, then you enjoy tax-exempt status. While that’s a huge advantage, LLCs have a lot more flexibility accessing financial options — including business lines of credit. NPOs are typically regarded as higher risk, and more likely to to be denied funding.
You’re lacking a solid business plan. No matter who your lender is, they’ll want to feel confident that your business knows where it’s going. A comprehensive business plan demonstrates viability and lets lenders see your financial projections, as well as how you manage risk.
There’s no relationship between your business and the lending institution. Nurturing a relationship between your business and your loan officer is crucial. When loan officers feel they know you well, they’re a lot more willing to go to the mat for you.
Lack of collateral. In certain cases like medical loans, lenders will need collateral in order to approve your healthcare business for a line of credit.
Here’s how to nurture a good relationship with your bank →
What are my payroll financing options if I don’t qualify for a line of credit?
Fortunately, you have other, sometimes better, options for payroll financing besides a business line of credit.
- Negotiate payment arrangements. One way to ease payroll deadlines is to negotiate the payment arrangements with your vendors and suppliers. More flexible terms and longer payment plans give you more wiggle room and allow you to make payroll on time.
- Invoice factoring. This is an arrangement where a third-party company purchases your unpaid invoices at a discount. The advantage is immediate cash flow, which you can then use to make payroll. Accounts receivable financing is a similar option that provides cash advances using unpaid invoices as collateral.
Learn more about the ins and outs of invoice factoring here - Advance payroll funding. Advance payroll financing allows healthcare businesses to cover payroll every month, without going into long-term debt. Some important features to look for in a payroll finance company are: quick approval, same-day funding, low interest rates, and no penalties for early repayment.
Here at Payro, we’ve helped hundreds of healthcare businesses meet payroll consistently, every single month. - Government assistance. Local, state, and federal programs offer financial assistance for healthcare such as grants and low-interest loans. The process can be long, though, and applying often needs a specialist, costly grant writer, so while this is something to keep in mind, it’s not an immediate solution.
There’s a world of alternative payroll solutions out there beyond the traditional business line of credit.
By exploring options like payment arrangements, invoice factoring, payroll financing, and government assistance, your healthcare business will be able to keep payroll running smoothly and employees paid on time.
Morris Reichman
hello@payrofinance.comMorris Reichman is the founder and CEO of Payro Finance. Former Vice President at Infinity Capital Funding an alternative finance company, Morris possesses a versatile background in the finance industry. Having spent 7+ years working across global macro operations and start up corporate finance Morris's expertise is in business accounting, risk management and investment analysis. Morris founded Payro Finance to support business owners and ensure their business continuity.
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