September 20, 2018 OrthoCatapult

Rethinking Minimum Down Payments

It shouldn’t be news that Americans, in general, are horrible at saving money. However, a high percentage of orthodontic practices still require significant down payments and it’s stifling their growth. If your practice requires down payments of $500 or more, you owe it to yourself and your practice to re-evaluate your minimum requirements. Below are the results of surveys from the past several years, showing just how bad the financial issues are for most American households:

The Pew Charitable Trust Brief

On November 18, 2015, the Pew Charitable Trust published a brief, “What Resources Do Families Have for Financial Emergencies?”, which highlighted the financial situation of 7,845 US respondents. The findings were striking. Here are three that really jumped out to us:

  • 33% of American families have no savings, including 10% of respondents with more than $100,000 annual income.
  • Typical households with more than $85,000 annual income can only replace 40 days of income from savings.
  • 80 percent of respondents have less savings than they thought similar households should have.

MagnifyMoney Survey

On December 28, 2015, MagnifyMoney published their results of their nationwide, only survey of US adults between December 24-26, 2015. The results, calculated by the 532 responsdents, were concerning; especially the fact that 48.6% of respondents had less than $500 available in their checking and savings accounts combined. Here are some the survey results in more detail:

No Spending Plan or Budgets

  • 50.7% set no budget. Instead, they “just spent.”
  • 34.2% set a budget and followed the budget.
  • 15.1% set a budget, but ignored the budget and spent more.

A Majority of Americans are “Broke”

  • 24.8% have less than $100 in their accounts.
  • 23.8% have between $101 and $500 in their accounts.
  • 7.7% have between $501 and $1,000 in their accounts.
  • 16.4% have between $1,001 and $5,000 in their accounts.
  • 27.3% have more than $5,000 in their accounts.

Federal Reserve Board Data

According to the Federal Reserve Board in 2018, only 40% of Americans have access to $400 in emergency funds. “The finding that four-in-ten adults couldn’t cover an unexpected $400 expense without selling something or borrowing money is troubling,” said Greg McBride, chief financial analyst at “Nothing is more fundamental to achieving financial stability than having savings that can be drawn upon when the unexpected occurs.”

Bankrate Financial Security Index

According to Bankrate’s Financial Security Index from June 2018, 63% of American’s can cover 5 months of expenses or less from emergency savings.

Are Your Minimum Down Payments Limiting Your Practice Growth?

The moral of this story is Americans are horrendous savers and if you want exponential growth in your orthodontic practice, you need to meet these families where they are at.

Over the past several years, the orthodontic industry’s consultants have almost universally recommended presenting financial plans with a maximum of $500 Down Payment and $200/month or less. Given the data listed above, we agree 100% with those maximum guidelines for orthodontic practices that are looking to grow significantly. However, to help offset some of the cash flow issues that can occur, especially with higher aligner lab fees, we also encourage practices to entertain increasing their Pay-In-Full discount to 6-8% and offer a 50% Down Payment discount of 3-4% to help encourage larger down payments from families with the financial means to do so. By increasing the number of Pay-In-Full and large down payment starts, practices can offset cash flow issues proactively when offering low down payments and extended payments to all your patients.

OrthoCatapult® users can easily set the discounts for Pay-In-Full and  Large Down Payment Discounts for each practice location. Additionally, OrthoCatapult allows orthodontists to set the maximum extended payment terms, including the number of extended months and progressive interest rates they want to offer to each responsible party Risk Category (A /B/C) for each patient group, treatment length and treatment modality offered. Making the complex, extremely easy!

The OrthoCatapult® Team

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