07 Jun How Healthcare Organizations Can Benefit From Payroll Financing Loans
Although any industry can find itself in need of a loan to cover payroll, businesses or organizations whose revenues are tied to insurance remittances or government reimbursements are prime candidates to benefit from this funding strategy. While expenses, especially staffing costs, are regular and consistent, revenues for these industries can be slow-moving and generally unpredictable. Many businesses turn to a type of medical business loan known as healthcare factoring (also known as “medical factoring”) but factoring has its downsides. For this reason, payroll financing loans are the preferred solution for organizations in need of cash.
Cash Flow Challenges in the Healthcare Industry
Insurance providers, Medicaid, Medicare, and DOEs all have complex payout procedures, and it can take anywhere from 30 to 90 days to receive reimbursements or remittances. Payroll, on the other hand, is typically weekly or bi-weekly, and slow receivables can create challenging cash flow issues for even the most established organizations.
Consequently, payroll financing ensures that clinics, hospitals, and doctors can get the funds they need to pay their staff on time. Unfortunately, many of these organizations make the mistake of turning to various forms of physician practice loans or medical practice financing. However, these options often result in hefty fees and interest, which ultimately take away from their revenue.
The most notable industries that find themselves in this predicament are healthcare and special education service providers. These two industries can include any of the following businesses:
- Urgent Care Centers
- Medical Offices
- Assisted Living Facilities
- Skilled Nursing Facilities
- Home Care Agencies
- Special Education Schools
- Therapy Agencies (OT, Speech, ABA, etc.)
Real-Life Case Studies on the Benefits of Payroll Financing
Typically, these businesses find themselves in need of financing due to rapid growth or because they have run into a billing issue. Here are just three quick examples of similar businesses that we helped finance:
- An upstart home care agency was experiencing rapid growth, prompting a hiring spree. As their payroll kept increasing, the gap between their bi-weekly payroll and the 30-60 days it took to receive their insurance remittances was proving to be an issue with payroll financing proved to be the perfect solution.
- A well-established nursing home opened a dialysis center, which obviously meant hiring a full staff. Although insurance was billed every 15 days, they would only receive their payments after 45 days. Thanks to our payroll funding, the business was able to bridge the gap between incoming payments and outgoing salaries — without having to turn to costly medical practice loans.
- A special needs agency experienced a technical malfunction when billing insurance, which delayed their remittances by a full month. Rather than taking on the risks of medical practice business loans, they turn to us to help them pay their staff while they waited for their remittances to come in.
The Bottom Line
These examples are extremely common in the healthcare and special needs industries. In some cases, businesses may need one-time financing just to get over the hump, while others may need to utilize payroll financing on a more consistent basis. Either way, small business loans for doctors and other healthcare professionals via payroll funding are great ways to keep staff paid consistently — without the downsides associated with medical receivables factoring.
If your business requires short-term funding to operate efficiently, payroll financing may be the right solution for you. Call Payro Finance today to see how we can help.