Best Sources of Working Capital for Medical Providers

Medical providers, from small clinics to major hospitals, offer one of the most important services in society. Yet they are still essentially a business, and as such they need working capital to ensure the smooth flow of daily operations. They need to pay for a workforce possessing specialized skills and knowledge; they need to purchase advanced equipment that grows more expensive each year; and they also need to spend for legal defense against claims of medical malpractice. But working capital may not always be available right away, because often they’re paid by insurance companies which have always been traditionally slow in paying.

Fortunately, when it comes to obtaining the working capital they need, medical providers have a number of options:

  1. Loans. There are many types of loans for medical providers. Some are based on real estate and work like a mortgage, while others are based on equipment. If you are a medical provider, the lender evaluates your credit history and the viability of your healthcare facilities, and then loans you the money you need when you can offer something substantial as collateral.
  2. Factoring. This is another way of using your assets (your accounts receivable) as way of obtaining the money you need more quickly. Essentially, instead of waiting for the insurance company to cough up the money, you get about 75% of it right away from the factor, with the rest to come when the insurance company finally pays you. This can also be an effective cost cutting measure for you, as your clinic doesn’t have to establish a collections department in order to get the payment. The factor does that for you.
  3. Grants and donations. The government and private organizations may provide you a grant or donation. A San Francisco hospital can even receive as much as $100 million as a gift from wealthy donors, and so can a hospital in New York. Normally though, donations are not really sizeable and hospitals often provide direction on how even regular folks can make donations.
  4. Selling Assets. Sometimes a hospital may sell a building or some land in order to obtain working capital. Even medical equipment may be sold as well.
  5. Venture capitalism. This is a very common practice in the hi-tech industry in which a start-up sells a percentage of its shares for some quick money. Now venture capitalism has entered the healthcare industry as well, and some hospitals are selling shares to investors. Even some non-profit hospitals are generating interest from investors.
  6. Joint ventures. This is when two different companies share risk and offer access to working capital, while reducing costs. The joint venture, however, has to comply with rather stringent antitrust government regulations.

Many medical providers seem to rely only on loans and grants in order to obtain the money they need. With some of the alternative methods of obtaining working capital for medical providers listed here, hopefully you can achieve greater success in getting the funding that your clinic or hospital badly needs.