Why You Need Medical Receivables Factoring

Medical receivables factoring is a special type of financing that can help businesses in the health care industry. Whether you’re a medical or dental clinic serving residents in your community or a business that caters to health care centers, with factoring you can get the funding you need more readily than if you apply for a bank loan.

How It Works

Factoring is simple. Instead of waiting for an interminable length of time for your customer or insurance company to pay the invoice, you simply submit the accounts receivable to the factor instead. The factor offers about 80% of the value of the accounts receivable in advance, which you can then use for your own purposes. Once the customer finally pays the factor in full, you then can receive the rest of the money once the factor has deducted its fees.

Purpose of Medical Factoring

There are many possible reasons why a business in the health care industry will want an infusion of cash. One very common reason is to boost the cash flow to help pay for employees such as receptionists and nurses. It’s not really a good idea to miss a weekly salary payment when you’re running your own business and you rely on dedicated staff to help you out.

The cash flow can also help buy supplies that medical clinics need, such as bandages and gloves. These supplies need to be replenished on a regular basis, and that means you need to have your cash flow ready to cover the expenses.

Another good reason is to procure more equipment. Even if you buy used medical equipment, the expense can be very high and can really put a dent on your cash flow. But more sophisticated equipment can put you at an advantage over your competitors.

So how can you get the funding you need? Banks are not as reliable a lender as they once were, and that means you need alternative sources of funding. For many clinics and other businesses in the health care, medical factoring stands as a reliable source of funding that’s unmatched in the benefits it provides.

Special Concerns

Medical receivables factoring is much like other types of factoring in other industries. However, some aspects of it are unique to the medical profession.

For example, there is the matter of dealing with medical insurance companies. Collecting payments is a common task delegated to factors, and in this case it is an extremely welcome relief for a lot of doctors. But medical factors must be experienced in dealing with these insurance companies to avoid any surprises.

Medical insurance companies often contest medical bills, so as a result they do not pay for the whole amount stated in the accounts receivable. As such the factor must expect this.

Another common occurrence is the slow payment of invoices. It’s not terribly unusual for insurance companies to pay only after 90 or even 120 days. This means that medical factors shouldn’t charge exorbitant rates for payments that go past 30 days.

Medical receivables factoring can be very helpful for clinics. But you need to make sure that you get an experienced medical factor so that you can maximize the benefits.

Published by

Chris Lanchech

Hi everyone, my name is Chris and I am a junior analyst at Neebo Capital and an inspiring blogger. We enjoy speaking with business owners and entrepreneurs who come to Neebo Capital looking for cash flow solutions.

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