Very few industries are immune to seasonality. This includes medical practices, which go through busy and slow periods just like any other small business. For most doctor’s offices, August is their busiest time of the year. But once the average medical patient completes a scheduled check-up, he or she is not likely to return anytime soon. Income drops significantly from August to September, continuing on a sharp decline for the next three months or so. Small business owners are accustomed to running lean. But medical practices are a unique case. They cannot simply “ride it out” or wait until their cash flow issues resolve themselves.
After the busy season, for example, it’s common for doctors and dentists to discover that important pieces of equipment have become outdated or are in need of repairs. The combination of slow income and compromised methods of increasing that income is the main reason equipment financing exists.
What makes Equipment Financing unique?
Before delving into the various advantages of equipment financing for medical practices, it’s best to first clarify what equipment financing actually means. You may have seen equipment loans displayed as an alternative to conventional small business loans. A look at the websites of many business lenders will show equipment financing beside other options like a merchant cash advance, business term loan, or business line of credit. This suggests that these business lenders are offering a special business funding program with terms and requirements that are completely different from their other options.
But when you finally look up the definition of equipment financing, you find out that this just refers to a small business loan that is used to purchase equipment. Theoretically, there really isn’t much that separates equipment financing from a standard business term loan or working capital loan of the same amount. The only real difference is that terms for equipment financing are supposed to based on the time it takes for your desired piece of equipment to contribute to your revenue stream.
Coordinating loan payments with insurance payments
Traditional business lenders like banks do not typically take industry-related circumstances into account when assigning terms. Companies like United Capital Source, on the other hand, are fully-aware of how hard it is for medical practices to make fixed, monthly payments during slow periods. You’d think this would be easy considering how many people visited their offices the previous season. But many medical practices earn most of their income from insurance providers, which, as any doctor will tell you, are not known for punctuality. So, while other small businesses are exiting the busy season with plenty of cash to support themselves, doctors are still waiting on delinquent payments from insurance providers.
Doctors should therefore strive to work with business lenders who don’t hold them to the same standards as, say, a retail store. These business lenders do not offer terms that will only make it more difficult to cover regular business expenses. Instead, smaller or larger payments are permitted in accordance with fluctuations in revenue or cash flow. This system typically works well with doctors because once the last of those delinquent payments comes in, there is only a brief gap before appointments start to build up.
Low revenue shouldn’t impede preparation
Securing new equipment probably isn’t the only thing you have to do to prepare for the busy season. You must also order more inventory, hire more staff, or ramp up your marketing efforts. These are just a few factors to keep in mind when you are deciding the right time to pursue equipment financing. It may be better for you to purchase the equipment as soon as possible, getting it out of the way so you can spend the rest of the slow season maximizing the likelihood of a strong winter and spring. Or, you might want to wait until late December, which would essentially let you pay off the majority of the debt when revenue has stabilized.
It really depends on just how slow your slow season is expected to be. Doctors have an advantage here, because most patients book appointments well in advance. If you still have a decent amount of appointments during the slow season, you may be able to secure a small business loan that gives you the ability to purchase equipment and pay your bills almost simultaneously.
It doesn’t have to be complicated
While equipment financing is virtually unrivaled for long-term benefits, it isn’t the only efficient method of purchasing equipment without obstructing cash flow. United Capital Source offers numerous other business funding programs geared towards large investments when income is down. But no matter which program is recommended for you, rest assured that neither will be significantly more complex than the other. We understand how busy medical professionals can get at any time. Working with UCS means never having to worry about a mistake or glitch on our part, especially when it comes to telling you how much money you’ll need to survive the slow season.