An excellent form of financing is selling aging medical account receivables, a process known as factoring. Factoring is converting the aging medical account receivables of a business into working capital by selling outstanding invoices to a ‘factor’ or funding source at a discount. Medical account receivables factoring gives the company immediate cash to manage its operations more efficiently, sustain, and grow the business. Selling your medical account receivables gives you the capital to meet payroll, take supplier discounts, purchase equipment, and increase staff.
A tried and tested method can alleviate cash flow problems
Many businesses do not consider aging account receivables factoring when looking for financing, possibly because they do not understand it. However, factoring is one of the oldest methods of providing working capital to help businesses solve their cash flow needs. Cash flow problems often occur at the early stages of business development or during periods of rapid growth. Cash flow can become a problem in the healthcare industry when completed work is unpaid for 30, 60, or 90 days after issuing the invoice. This forces some businesses to try and obtain small business loans. However, conventional borrowing increases business expenses and typically requires additional collateral. Some companies, especially smaller ones, are declined by banks because of loan underwriting criteria.
Who is a candidate for medical factoring?
Instead of analyzing the applicant’s financial statements, the factoring company evaluates the strength of the client’s account receivables. If the business has a product or service that it provides to a creditworthy customer, then it is a candidate for factoring. Account receivables factoring does not create debt or require additional collateral, and it is straightforward to start. Depending on the medical facility, cash advances from 80% of the invoiced amount is normally obtained in 24 hours or less!
Learn more about PROVE and our medical finance services here.