Accounts receivable financing, or factoring, can be an incredibly useful resource for certain types of businesses. This is particularly true for medical practices. Read on to explore how medical factoring could benefit your practice.
Medical Factoring: What is It?
Accounts receivable financing enables companies to be paid in advance for unpaid invoices. In the case of a health care business, such paid advances may be extended to include claims from Medicare, Medicaid, and private insurance companies. The term, medical factoring, is in reference to two different kinds of this sort of financing: medical invoice factoring, which applies to invoices from vendors, and medical receivables factoring, which applies to insurance claims.
How It Works
The primary benefit of accounts receivable financing is that you can receive quick payment when your cash flow is low. This is accomplished by following a few steps. First, you need to submit your unpaid invoices or claims to a factoring company, also known as a factor. Then, the factor will provide you with a high percentage of the value of what is owed (typically 80 to 90 percent). Next, the factor waits until vendors and insurers pay the full amount owed. Finally, your practice will receive the remaining balance owed (minus the factoring fees).
Which Health Care Businesses Might Utilize Accounts Receivable Financing?
A broad assortment of health care companies may benefit from and qualify for medical factoring. These include hospitals, private medical practices, pharmacies, radiology centers, and many other businesses centered on medicine.
The requirements for eligibility for such financing are generally less stringent than for regular business loans. However, your business will typically need to meet certain standards, such as having a minimum amount of accounts receivable each month, insurance claims that are due within a specific time period, and no unpaid taxes or liens.
If you run a health care business, medical factoring could provide you with the cash you need for smooth operations. Contact Capital Connex for more information on accounts receivable financing for your practice.