Is Medical Factoring Right for Your Business?
Providers and vendors in the healthcare industry have to constantly cope with billing systems that require payments in 30 to 120 days. Long waits for invoice payments can create problems with cash flow. Strong cash flow is essential for healthcare companies to continue to function efficiently and save lives. One effective solution to this problem is medical factoring. Here is some information on medical factoring to assess whether it is a good fit for your business.
Medical Factoring Basics
After your healthcare company has sent out accounts receivable to clients, you can approach a financing company that offers medical factoring. The factoring company reviews your medical business, the accounts receivable you want to factor, and the credit scores of your customers. You sign an agreement detailing fees, terms, and your maximum credit line. You then receive an advance of 80 to 90% of the value of the invoices you have agreed to factor. The factoring company handles collections. Once your clients have paid their bills, you receive the balance minus the factoring company’s fee.
Advantages of Medical Factoring
Medical factoring closes the gap between the sending out of invoices and customer payments, keeping your company cash flow strong. The application process is quick and easy. Even a business with a poor credit rating can qualify because factoring companies are more concerned with the credit scores of clients. The funds acquired through medical factoring can be used for urgent needs such as rent, utilities, staff salaries, equipment, marketing, insurance, and legal assistance.
The Alternative of Medical Receivables Financing
An alternative to medical factoring is medical receivables financing. This form of funding involves using your unpaid invoices as collateral for an advance of up to 100% of the value of the receivables. With medical receivables financing, the approval process is even quicker, and your business instead of the factoring company handles the collections process.
For more advice on medical factoring and medical receivables financing, contact TCF Capital.