If you own a medical company and you need a quick infusion of working capital, one of your best options is to approach a lender who can offer accounts receivable financing. But that just begs the question of which among the many medical accounts receivable lenders you should choose to work with.
First, you should develop your own list of candidates. You should ask trusted friends and colleagues for recommendations, especially if they have worked with an A/R lender before. Their insights can prove valuable in giving you an accurate idea of what it’s like to do business with a particular lender. In addition, you may also want to do your own search online.
Once you have your list, it’s time for you to set up an interview appointment with the lender. Here are some sample questions you need to ask:
- How long have you been in business? This is of course crucial, because a new lending company may not be as stable or as reputable as an established business. Your best bet is a lender who’s been in business for a few years.
- In what particular aspect of the healthcare industry do you specialize? It’s not enough that they work with medical companies. It’s important that they have worked with the kind of medical business you’re running. Some lenders focus on clinics, while others with nursing homes or with companies that manufacture medical devices.
- How much can you actually offer in financing? Some companies may offer financing ranging from $1 million to more than $25 million, while others may start with $2 million. Even with such broad ranges, lenders often have a special comfort zone so you need to ask the average size of their clients.
- How much is your “due diligence fee”? This fee can be very different from one lending company to another. This is a fee you need to pay upfront, but some lenders may charge only nominal fees.
- Will you be charging for an audit, and for how much? Loans and advances based on accounts receivable may require the lender to learn about your billing practices before they offer you the money you need. The audit can inform the lender as to whether your company is billing insurance companies properly. The audit can also show that you are at least getting paid as expected. If you’re running a larger medical company, the audit can be very extensive and therefore very expensive.
- Do you accept Medicare and Medicaid invoices? While most lenders can work with regular insurance companies like HMOs, Medicare and Medicaid claims are very different. If a sizable percentage of your patients’ bills are paid through Medicare and Medicaid, then you need a lender which can finance those claims.
Ask for references, and then contact those references to find out about their experience working with the medical accounts receivable lenders. It’s not all about how much money they can lend you and what fees they charge. It is also be about how easy they are to work with, and how helpful they are in addressing your needs.