The Growing Impact of Alternative Lending on the Healthcare Sector

Providing healthcare to the poor is a Herculean task; one that consumes a large portion of a government's scarce resources, and one that businesses perceive to be commercially unviable. The challenge governments face in financing healthcare lies in their ability to create accessible and affordable healthcare systems that have scale (reach), permanence (multi-generational), and are supported by sustainable financing mechanisms. This cannot be tackled without a critical look at innovative strategies that create an efficient, affordable, and accessible health care system. Many healthcare sector players are looking for funding mechanisms beyond the conventional borrowing route.

Alternative lending has brought in great advantages for this sector as it allows doctors and other medical professionals to build upon or purchase practices, and to expand their existing ones. Alternative Lending is a Trillion Dollar industry. That is not a typo.  That’s trillion. That is a big number. Alternative Lending is a broad description of a variety of products.  You may have also heard the terms, Online Lenders, Alternative Financing, Payday Lending, Title Loans, Peer to Peer Lending (P2P) and Marketplace Lending to describe these businesses.

Alternative lending platforms allow loans to be easily procured since their approval and disbursal times are short, and the criteria for eligibility are more flexible. Also, the “unsecured” nature of these loans makes them easily available to the borrower.

Tiding over short-term glitches using a line of credit:

It’s no secret that the cash flow of healthcare practices, whether it be medical, dental or veterinarian, is unpredictable and can be inconsistent. It can take weeks or months for your patients or insurers to submit payment, which is beyond your control. The timeframe between patient treatment and receipt of payment is referred to as your business cycle. And, the longer this cycle, the harder it is to manage your cash. With limited cash, can your business run efficiently and deal with unexpected emergencies, such as equipment failure?

In such an instance, where receivables are far off into the future, a practice can acquire a line of credit on a meager amount at simple interests and can pay back within a few weeks and months. In a Line of Credit model, the lender approves a certain limit and allows the borrower to withdraw as and when the requirement comes up. A Line of Credit can also be revolving in nature, meaning, as and when the repayments are made, the initially approved limit remains available to the borrower. This way, the business can not only stay afloat but also ensure that the amount lost on interest is minimal.

Bridging financial gaps speedily with merchant cash advances:

Over the last 20 years, there has been an increase in hospitalization in private facilities (in both rural and urban areas), marking a rise in preference for private set-ups. When such a set-up is in a sticky situation without sufficient funds or the source of a bank loan, unsecured loans in the form of merchant cash advances are the only possible and viable alternative for keeping the business afloat. Alternative lenders provide these advances irrespective of business size with all types of credit values. The major benefits of such merchant cash advances is for those optometrists who wish to invest in new equipment, General practitioners who wish to expand their clinic or hospital, Chiropractors or orthopedics who wish to set up their individual therapy clinic, Dentists who wish to establish their own clinic, or for those who need 2nd, 3rd or 4thposition loans. The merchant cash advance provider would make the whole process easy as the processing time is shorter than conventional sources. For the borrower, it means getting a fast access to a lump sum of capital to fill his immediate financial gap with no immediate pressure to repay since the payment is in the form of a certain percentage of his future receivables.

Extending financing to patients:

According to recent World Health Organization estimates, every year 25 million households (more than 100 million people) are forced into poverty by illness and the struggle to pay for healthcare. This coupled with the lack of basic health infrastructure in rural and remote areas aggravate the health conditions of the poor, leaving them in a perpetual state of poverty. Access to health services and health protection is a key component of the fight against poverty as good health is a major driver of economic development and a necessity for the poorest nations' climb out of poverty.

An efficient healthcare system is critical in breaking the vicious cycle of poverty and poor health.

Integration of technology and medicine:

Gone are the days where only the ones with money received the best patient care. The healthcare providers’ primary objective to make healthcare accessible to all has led to a revamp in this sector. The healthcare sector is tying up with fintech companies and setting up exclusive merchant portals that will enable their patients to easily procure funding assistance. In addition, many online lenders have developed a separate healthcare portfolio. Instead of having to take a consult, go out and secure funds before returning for treatment, these initiatives are helping even people who are at the grass root level to help them lead a healthy life with the help of alternative lending and crowdsourcing. The face of medicine and finance together is bringing in revolutions in the world of healthcare.

In conclusion, one thing is for sure, owning and running a healthcare-related business has never been such a challenge. The focus is on delivering the highest quality of care while dealing with slower insurance reimbursements, mandatory equipment and technology upgrades and increased regulation. All healthcare sectors deserve a lender that knows the challenges and can provide healthcare practice financing and medical office financing that is tailored to meet the businesses specific needs.

  • February 15, 2018