How medical factoring works

When clients and customers don't pay their bills on time and payroll and other big expenses are due, it's easy for health care businesses to get stuck in a short-term cash crunch. Having too many accounts tied up in receivables can put a business at a disadvantage, but obtaining a loan isn't the only option for fixing these circumstances.

Medical factoring allows health care companies to quickly receive money based on the total value of outstanding receivables. Receivables factoring may be the best solution for medical offices, medical supply companies, and health care practitioners that need funds for business operations and don't want to or can't obtain additional financing from a bank.

Who benefits from medical factoring?

Whether the company needs to make a lease payment or manage payroll, the extra cash from medical factoring can help prevent cash flow problems and allow business operations to run smoothly.

Nearly all types of businesses in the health care industry can benefit from medical factoring because it serves as a powerful financial resource when money is in short supply. Businesses that most benefit from medical receivables adjustments include:

• Medical testing centers
• Growing medical practices
• Medical supply companies
• Medical professionals working with HMO and Medicare plans on a regular basis
• Other types of health care businesses that work with insurance companies

How medical factoring works

Unlike typical factoring for businesses, medical factoring for the health care market offers more options for receivables that pass their 30-day and 60-day terms. Medical factoring allows health care companies and businesses to accelerate outstanding payments, improving short-term cash flow. While there is a fee involved with medical factoring, there are several advantages of using this type of service when funds are low.

Key benefits of medical factoring include:

• Quick receipt of funds. Instead of waiting up to 90 days to receive payment from an insurance company, a business can obtain funds within 24-48 hours from a medical factoring company.
• Financing based on net collectibles. Money received is based on the amount an insurance company would be paying for the claims, not the gross amount.
• Low rates. The fees involved with medical factoring vary by company, but most offer discounts on large volumes.
• Simple financing process. Most medical factoring companies work by requesting a copy of all billings and then sending an advance for a certain percentage. The remainder of the funds is put into "reserve" until the invoices are paid by the original client. After the percentage fee is calculated, the remainder is sent back to the medical office or put directly into a rebate account.

Looking for a medical factoring company for your practice or business? Try our free request for quotes service. We'll match you to qualified factoring providers who can help get your cash flow back on track.