Which is a Better Financing Option? Doctor Loans or Medical Factoring
Doctor loans and medical factoring are two available modes of finances for physicians. While both provide funds to doctors, there are differences in the way both serve their needs. Read on to know which is a better financing option.
What is a Doctor Loan?
Doctor loans can be structured as a term loan as well as a line of credit. When structured as term loans, doctors make monthly payments. When offered as a line of credit or a flexi loan, doctors can borrow within the credit limit and pay back as and when required.
What is Medical Factoring?
Medical factoring aids doctors and healthcare practices address cash flow problems arising due to a slow payment of medical insurance claims. It provides an advance on medical claims, thereby aiding physicians to smoothly run their daily operations.
Addressing Problems Due to Cash Flow: The Common Connection
Both doctor loans and medical factoring help physicians overcome woes related to cash flow. As pointed out in the survey conducted by Capital One Spark Business (COSB), 70% of physicians cited cash flow along with reimbursement for patient treatment as their biggest concern in 2017. However, the common connection ends here.
Doctor loans serve a wide variety of purposes, from education to working capital to practice expansion unlike medical factoring where the sole objective is to address problems related to medical insurance cash flow.
Funding Higher Education
Physicians can avail doctor loans to fund their higher education. For better prospects, MBBS graduates pursue MD or MS. Pursuing MD or MS from a private college in India is an expensive affair where fees can run into several lakhs of rupees. In some private colleges in the country, the average fee for MD/MS is as high as Rs.40 lakh per year. A doctor loan is a more prudent financial tool here. Bajaj Finserv, for example, offers special loans for doctors that offer upto Rs.30 lakhs that they can use for their higher education. This is much higher than a regular education loans that most banks offer.
Expanding Your Practice
It is estimated that 600 million people in India have little or no access to health care, with most of them in rural areas. Providing health care facilities to them requires expansion that involves setting up infrastructure, buying equipment, hiring and training staff, investment in technology, and much more.
A Flexi Loan goes a long way to satisfy business expansion needs for medical practitioners. Such loans allow doctors to withdraw the full amount in one go or in parts as per their requirements and pay only the interest as EMI, with an option to prepay/ part prepay the amount anytime during the tenor.
Purchasing and Maintaining Equipment
With India slowly becoming a medical tourism hub – experts expect the Indian medical tourism market to reach US$ 8 billion by 2020 – it’s imperative to invest in equipment and medical devices to provide healthcare of global standards. However, in India almost 80% of medical equipment is imported.
Dr. Nalla G Palaniswami, MD of Kovai Medical Center and Hospital, Coimbatore, says, “Maintenance cost for an imported machine worth Rs.5 to 6 crores is between Rs.25 lakh and Rs.30 lakh.”
Doctor loans with high loan amounts of upto Rs.2 crore, and flexible repayment options come with minimal documentation and 24 hours disbursal features and are a handy tool to purchase and maintain equipment.
Doctor Loans – Offering a Wider Scope
Doctor loans act as a more reliable channel of finance serving multiple purposes for physicians, right from their education to practice. Some financial institutions, particularly NBFCs, offer these loans collateral-free, which is a huge boost for professionals who don’t to risk their assets while obtaining funds.
While medical factoring concentrates on easing a single bottleneck, doctor loans focus on reducing pain points for medical physicians on multiple fronts.
The choice is now yours!