Asset Based Loan

Does lack of Patient Insurance hurt Dental Practice loan requests?

Medical practices have been considered desirable by traditional funding sources for a long period of time due to the professional nature of the business and the low default rate.  Other factors for this include a consistent accounts receivable balance due to a high percentage of the patients having insurance.

However, this high percentage of insured patients applies primarily to traditional medical practices.   Dental practices and Chiropractor practices have a far lower level of insured patients than medical practices.   As a result, when Dental practices and Chiropractor practices apply for financing at traditional and some non traditional sources, the lack of patient insurance used for payment is considered in the loan request.

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When a Medical practice applies for financing, their accounts receivables may total in the hundreds of thousands of dollars.   Most Dental and Chiropractor practices will have Accounts receivables under $100,000 with most being below $50,000.   As a result, traditional financiers are not able to use and assign the practice’s accounts receivables as collateral for financing, which makes their asset position somewhat weaker in the financing request.

The root cause of this is that most individuals have health insurance but not as many have dental insurance.    Those that have dental insurance often elect the insurance through one of their workplace programs.    A very limited number of individuals have insurance that will cover treatment procedures at a Chiropractor.    However, there are more insurance policies available to cover dental work than chiropractor work.

As a result, when practices seek financing, such as a dental practice loan, they should be aware that they have one less significant asset available for the financing than a traditional medical practice.   One strategy that can make up for this is to work with their Accountant to make sure their financial statements are reported in an way that makes their bottom line more profitable.    There are some accounting options that businesses and their accountants can choose from that will more likely allow a practice to show a positive net income which will closely considered as part of the credit evaluation whether the practice can handle the additional debt service.




Why Businesses get hurt if debt ceiling isn’t raised

Many business owners are conservative.   They obey the laws, watch their spending, and are cautious.   Many will say that the Government should not increase the debt ceiling knowing that the Government will be taking on more new debt.    It is a good idea for the Government not to take on new debt, but not this way.

Currently, the Government spends over 40% more than it takes into it’s coffers in revenues.   Economists have argued in past years,  by what percentage the Government can cut it’s spending in one year without hurting the economy, and many Economists felt that a cut of just 4% per year would slow down the economy short term, even if long term it benefits the country.

If the debt ceiling is not raised, or raised within one or two days after the deadline, the stock market will take a major dive.  Individuals will pull back on spending until they are comfortable with what will happen.  Large Corporations will follow suit and put on hold and delay any hiring or expansion plans.    Interest will continue to be paid or the country would suffer a true technical default.   World markets will truly be aghast and dive mostly due to the reckless self destruction.   Moody’s and Standard and Poors may impose another credit downgrade, further aggravating markets.

The Government will truly be forced to choose who receives Government money and who does not.   Watch in amusement as some of the same Congressmen and Senators who voted to not raise the debt ceiling suddenly demand that the flow of money continue for their districts.   Unemployment benefits, assistance for farming, highway money, and Government contractors will undoubtedly be among the first victims of a massive spending cut.   Companies that provide products for the military will also take massive cuts because Congress will make every effort to pay the soldiers.   If the department of education takes cuts this will cut funding to colleges and schools.   Other departments such as the Commerce department, the department of labor, and the State Department would all very likely take cuts.

While many people feel this would be good in principle, the state department includes funds for Embassies and Consulates, including the defense of those organizations.  The commerce department includes food safety and inspection.   Funding for Ports and border security have to be considered.    If the Department of Homeland security is cut, then many functions now happening would slow down.   Many of these employees would be temporarily cut.

The media effect would be tremendous.   Media outlets will interview unemployed and furloughed employees who will vent vicious frustrations.    Public opinion polls will reflect the worst ratings for Congress ever in it’s history.    Such a situation will be guaranteed not to be long term.    Congress will then quickly raise the debt ceiling.   Renewed talks of whether tax increases are justified in order to pay for desired services will begin.    People will realize the value of services lost, previously taken for granted.    Once it is accepted that the national debt must be address long term, their new found dependence of services will be weighed versus revenue increases and future proposed spending cuts.