With interest rates still low compared to past years, many practitioners are saving hundreds and even thousands of dollars per month by Debt Consolidation. Dental Practice Financing is the way to help your Practice get out of debt and into profits!
Another exception to this rule is in the case of cosmetic dentistry practices. Like so many other things in our current difficult economy, people are cutting back on luxury, non-necessity items. Cosmetic dental practices are being viewed with less certainty by the lenders, because these services are presently less in demand. This doesn’t mean that you won’t get financing for this type of practice, you just might not be able find 100% of the capital you are seeking.
For those looking for dental practice financing, the whole prospect of securing a loan can be daunting. There are so many different places to look for funding, but one wonders whether their practice will secure the needed moneys in order to open the doors or purchase that next piece of dental equipment. When it comes to finding a source for financing, ask the following questions; the answers should definitely help you secure the funding you seek from a source that is reputable and considerate.
Most banks are leery of lending against dental or medical receivables because of the complexities of the collateral. Medical and dental billing isn’t like that of other industries because of the variance in what is actually collected. Each insurance company may have a different contracted rate. In other words, a procedure billed out at $8,000 may result in a collection of $4,000 from one insurance company and $5,000 from another. Banks will likely be very conservative as to the amount they lend on receivables. With dental invoice factoring, the amount of funding is only limited by the pool of third party receivables that have been generated. Dental working capital loans can also be offered by banks, but are typically limited to $100,000 and are typically used for a specific purpose like debt consolidation or expansion. The types of loans are harder to get, as a minimum of a 685 credit score and a track record of practice profitability is required. Factoring is used to provide working capital on an ongoing basis and the qualification for this type of dentist financing is not dependent on credit scores of the dentist or performance of the practice.
The dentist first fills out an application, which asks various questions about the practice. Other information, such as the articles of incorporation and a receivables aging schedule are required. Once the application is reviewed by the factoring company and it’s determined that the practice appears to be a viable candidate for financing, a letter of intent (LOI) is issued which states the terms and conditions of the relationship. Such terms include the advance rate (the amount of cash given to the provider on a percentage basis) of each invoice and the fees to be charged. Once the letter of intent is accepted by the dentist, a contract is generated and a due diligence audit is scheduled. The audit is necessary for the factor to determine the average net collectible percentage and the adequacy of the practice’s billing system. Once the contract is executed and the audit is completed, the dental professional can start submitting invoices for funding on typically a weekly basis. The factor will advance the contracted rate and immediately wire the funds into the practice’s bank account. Upon collection, the difference between what is collected and the amount advanced is remitted to the practice, less the amount of fees associated with the financing. At this point, the transaction is closed.
