How is Healthcare Factoring Different from Financing?

While most would believe that any form of funding solution for healthcare providers would require a type of ‘debt financing’. Debt financing is when you borrow money for working capital. Three basic forms of debt financing are bank loans, asset based lending, and bonds.

Bank loans are the most universally understood lending. Bank loans are offered by a variety of lending institutions that will demand repayment terms through an interest rate. Interest rates vary depending on the current market standing, credit score, and other variables. Most bank loans will also have hidden fees and restrictions on how the funds can be used. It is important to know all of the terms of the bank loan before choosing it as a funding solution for your healthcare business.

Another type of debt financing is Asset Based Lending. Asset based lending, also known as commercial financing, is a business loan that is acquired by assets (or collateral). The line of credit is secured three different ways: inventory, accounts receivables, or other balance-sheet assets. This type of healthcare lending is the most effective when looking for a single cash infusion rather than a cash flow solution.

The last debt financing option is a bond. Similar to stocks, bonds are a type of debt security that offer a long term financing option for the business’ capital needs. The difference between bonds and stocks is that bond holders lend money rather than equity, and the bond issuer repays both the principal and the interest.

What all three of these debt financing options have in common is that they borrow money as your business’ working capital and have a negative impact on your balance sheets. Xynergy Healthcare Capital offers debt-free financing solutions for healthcare providers through our medical factoring program. Our factoring program purchases your third party claims rather than lending you money through a loan. Our medical factoring program is customized to help your business reach its goals, call 855-358-8258 today to speak with a healthcare factoring specialist.