Medical Receivables

Why Outstanding Invoices Are Not Considered in Traditional Lending

By April 11, 2020 No Comments

Medical accounts receivable, or outstanding invoices, is the inventory of billed services that currently exist on the books of a healthcare provider. These accounts represent services and treatments that have been performed and billed by the accounting department to the person or entity that is responsible for payment. 

Outstanding payments pose a cash imbalance in medical accounting

Due to their uncertain nature, the majority of traditional lending situations will not consider these types of accounts as assets that can be borrowed against. Although they represent money that will eventually be paid to the healthcare provider, in some cases, accounts will remain unpaid and uncollected upon due to default, an unfavorable judgment in a legal case, or bankruptcy. Because of this lack of certainty, accounts receivables cannot be borrowed upon as collateral the way fixed assets like equipment can. This poses a problem for many providers who need expansion capital since accounts. There ends up being a large portion of cash tied up, causing an imbalance between the cash on hand and cash owed. 

Because providers cannot usually borrow against what may be their greatest pool of money, they find it challenging to secure financing to expand to the levels necessary to grow their businesses. Alternative sources of funding through firms like PROVE is the answer to this dilemma.

Accounts receivables are assets that can secure immediate cash

PROVE provides medical accounts receivable funding options that utilize only these types of accounts as consideration. Where a traditional loan involves collateral, a medical accounts receivable financing consists of purchasing of the rights to collect on the money owed for past services. As the risk is completely shifted to the financing firm, many providers find this type of financing option to be what they were seeking to secure cash on hand. 

Guarantee of payment and a transfer of risk is an option

Accounts receivable are purchased outright by PROVE, who assumes all responsibility for collections from the moment of purchase. Payment to the provider is immediately transferred to them, working the same way as if payment was received from the patient. The medical facility is able to utilize this cash for any purpose and is in no way responsible for repayment if the account defaults. This type of security in guaranteeing payment is not even available on standard accounts that are paid directly by patients, as there is always the potential for default. 

A guarantee of payment without attached collateral or responsibility beyond the point of signoff allows medical providers to access not only cash but also structure plans that will guarantee specific amounts of ongoing revenue through reduced risk. Contact PROVE today to find out more about medical accounts receivable financing options.