NeeBo Capital Blogs – Page 16 – The Best Info For Factoring…

Questions to Ask Medical Accounts Receivable Lenders

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.

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Factoring for Small Companies: How Does It Work?

Among all the various potential sources of funding, factoring for small companies often prove to be the best option available. Traditional bank loans have become impractical and even impossible these days. Even if you are eligible, the entire loan application procedure can very tedious and time-consuming.

So how does factoring work? Here’s the gist of what you can expect:

A simpler and faster application process. It doesn’t take all that long to know if you can get the financing you need. That’s because in factoring, your credit doesn’t matter. What’s more important is the credit-worthiness of your customers. That also means the requirements for getting the financing you need are far less stringent.
Your accounts receivable will be assessed to determine if they are eligible. The factor determines whether the customer will actually pay the amount they owe you, on time. If your customers are huge companies, then they’re more likely to be approved than individuals or less well-known or new companies.
The factor then advances you a percentage of the value of the receivable. For example, if the amount of the invoice is $100,000 then the factor can advance as much as 85% of the value, or $85,000. Once the customer pays the entire amount, the factor forwards to you the rest of the 15%, less the fees charged by the factor.
The fees can vary depending on the factor. Some factors can charge as much as 3.5% of the value of the account receivable, while others may charge 2% or less. Other fixed fees may be applied as well.
The factor collects the payments for you. They’re the ones who contact the customers, and this frees you from setting up a collection department of your own. With experienced factors, customers can be approached professionally, so that your relationship with your customers won’t be affected.
Once a factoring line has been set up, you can determine how much you can receive. It all depends on the agreement with your factor, of course, but sometimes you can be the one who determines which of your accounts receivable are factored. This allows you to only receive the money you actually need thus preventing you from paying high fees.
It’s not a loan. A factoring service won’t affect your credit, because technically you’re selling your accounts receivable to the factor. You’re not getting a loan.
You can use the money to solve your cash flow problems. You can use the money to pay for overhead and meet payroll, buy supplies and foster growth.

In general, it all depends on the factor you choose. Factoring for small companies can work as a short term measure, but others consider this a long term solution and benefit from the collection services and the credit investigative services offered by the factor. Sometimes factoring is all that’s needed to save a company from the brink of disaster.

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How Useful is an Asset Based Medical Business Line of Credit?

It’s very difficult to secure a loan these days, especially if you want a medical business line of credit. Fortunately for you, you do have assets you can use to secure a line of credit. As a medical company, you can use your equipment or inventory as security and you can even get a loan based on the value of your accounts receivable. With an asset based medical business line of credit, you can borrow money up to the limit determined by the value of your assets.

These limits all depend on the particular lender you partner with. For example, a lender can offer up to 85% of the value of the invoices, while also offer 50% or even 75% of the value of the inventory.

So what are the benefits of getting this type of funding?

There are numerous types of medical businesses which can take advantage of this type of financing. Hospitals, clinics, hospices, and nursing homes are all ideal businesses. Medical clinics which offer specialized services can also be eligible, such as dialysis centers and diagnostic clinics. Even medical supply and equipment suppliers will also benefit greatly from this type of funding.
It may actually be somewhat easier to secure an asset based loan than you think. The requirements are less stringent than an unsecured loan. You only need good financial statements and reporting systems. If you will use your inventory, your products should be commonly sold. If you’re using your accounts receivable, they should involve creditable, trustworthy customers and payers.
It doesn’t take too long to secure a line of credit. It can take as short as a month. That’s not long, compared to how long you need to negotiate with a bank to avail an unsecured loan.
The interest rate isn’t high as you may have feared. It’s certainly lower than what you’d need to pay if the loan is unsecured, since the lender can simply seize your assets if you’re unable to pay back what you borrow. And the line of credit is much less expensive than medical factoring, since you still have to process the invoices and collect the payments from your customers yourself.

To assuage the concerns of your lender, you may want to establish a more long-term financing relationship instead of one that only lasts a few months. You may also be asked to personally guarantee the loan. In most cases, the lender will require the payments from your customers to go to them directly.

But despite all these drawbacks, an asset based medical business line of credit can work wonders for your company, as they can ensure that you have the working capital you need to keep your business afloat without experiencing any major cash flow problems. You can meet payroll, improve operations and even grow your business with the help of a line of credit.

Need Medical Factoring? Click Here or Call 1-888-382-3766 for a fast quote

Medical A/R Asset Based Revolving Line of Credit

A medical A/R asset based revolving line of credit is probably one of the most helpful financing options available to medical companies these days. Medical companies are very expensive to run. They require the purchase and use of expensive medical equipment, medical supplies are needed constantly, and the staff often asks for high salaries. And all your problems are compounded by the fact that insurance companies form the bulk of the payers.

For doctors, loans and medical factoring offer a few of the alternative financing options, but with an A/R-based line of credit, problems such as the need for greater cash flow to cover salaries and supplies can be solved.

Here are some of the more important features of an A/R-based line of credit:

The interest rate can be much lower than the fees required for medical factoring. It’s actually possible for you to pay only 6% in interest. With medical factoring, a 2% interest may be charged every 30 days. That’s at least a 24% annual interest rate, and some factors may charge higher fees.
With a line of credit, invoicing is still your responsibility. It will also be your responsibility to collect the payments.
The money or cap limit you get depends on the value of your invoices. Some invoices are not eligible such as accounts older than 90 days, or those involving insurance companies which the lender may not want to deal with. So if every month you pull in $150,000 in invoices and only $100,000 is eligible, then you get a maximum advance based on the $100,000.

Some companies may offer more flexibility when it comes to the accounts receivables they consider eligible. Some, for example, may accept borrowing against invoices that are 120 or even 180 days old. Others may be willing to accept invoices that will be paid by Medicare and Medicaid, and may even consider accounts with foreign companies.

Typically, the lender can advance as much as 80% (or even 85%) of the value of the eligible accounts receivable.
As the borrower, you only pay fees on what you actually draw from the line of credit. If you only take $50,000 in advance even if you have an $85,000 maximum limit, then your interest rate is applied to the $50,000. This is the main advantage of a line of credit against a loan. You only borrow what you really need, and you only pay the interest on that amount.
With that kind of money available to you, you can use it for a number of purposes that can benefit your company. You can use the money to pay tax and salary obligations, and even hire new employees. It can support your growth, and help you take advantage of any business opportunity that falls your way.
Lenders tend to monitor the state of your accounts receivable closely. You have to make regular reports on the status of your receivables regularly. This can be done weekly or monthly.
Some lenders may ask for financial covenants, but others may not.

Essentially, with a medical A/R asset based revolving line of credit what you have is a special “credit card” which you can use however you want. And you only need to make sure that your patients and their insurance companies make good on their payments.

Need Medical Factoring? Click Here or Call 1-888-382-3766 for a fast quote

Traditional Ways of Obtaining Working Capital for Growing Companies

If you’re running your own business, at some point you will have a need for additional working capital. You may, for example, encounter some difficulties in navigating the business “waters” and perhaps your revenue and profits are taking a beating because of a recent crisis in your industry. You may also be thinking about growing your business, and for that you’ll need more working capital as well. But getting working capital for growing companies isn’t exactly easy these days.

So what are your options?

Traditional bank loan. Despite what you may have heard, a bank must always be considered when you need money. This is especially true if you need money for a one-time problem, such as buying raw materials to fulfill a very large order or purchasing an expensive equipment that will enable you to offer new services.

Unfortunately, for many growing companies this option may not be exactly easy to get. You can approach your bank and make inquiries, but the loan application can be truly complicated and time consuming as well.

Government loan. This can be just as hard to get as a traditional bank loan, and some say it’s even more difficult. In fact, you can expect the entire process to include a lot of red tape, since the government is involved. This has forced some companies to give up even before the their loan application is being evaluated.

But if you do get this loan, the benefits can be substantial. Government loans come with comparatively low interest rates, and they often offer very long and flexible repayment terms.

Loans from friends and family. Who else would want you to succeed, but your family and friends? Some of these people do more than offer encouraging words. They may even offer additional funding. And when they do, their closeness to you may mean that the interest rates and the repayment terms can be very generous.

The problem with this option is twofold. One problem is that you don’t always have friends and family who are willing to lend you the amount you need. What if you need hundreds of thousands of dollars, or even millions?

The other problem is that if you are unable to repay the loan, you may be damaging essential personal relationships. This is the kind of situation that gave birth to the adage that friendships and serious business loans don’t mix.

Credit cards. Some people use their own credit cards to get additional working capital. While this may be fine for a short-term need, the rather high interest rates don’t make this option ideal for long term needs.
Adding a business partner. You can sell a percentage of your company for cash which you can use as working capital. This can bring in the money you need, but keep in mind that you are ceding future profits to someone else. In addition, you need to have a very clear agreement as to what your partner’s role will be in the company.

All these traditional methods come with their own drawbacks, which is why alternative methods for working capital for growing companies are becoming much more ideal.

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Understanding a Factoring Term Sheet

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If you are fed up with banks, you may want to consider getting additional financing through factoring. This is a method that enables you to get anywhere from 70% to 90% of the value of your invoices immediately, instead of having to wait for as long as 90 days to get paid by your customers. You negotiate with the factor, and after the negotiations you get a factoring term sheet that spells out in plain language what you can expect from the contract.

This is pretty much a straightforward document. It explains the factoring agreement, and it includes details such as:

The types of invoices they are willing to factor. Some medical factors, for example, won’t handle Medicare or Medicaid payments. It may also specify if you can choose the accounts you can factor, and whether each invoice is handled independently. Minimum amounts may also be specified. For example, the factor may not want to handle any invoice that’s worth less than $1,000.
The amount of the advance. This says whether you get 60%, 70%, 80% or 90% of the value of the invoice. Sometimes conditions will be spelled out as to which accounts can receive higher advances than others. For example, accounts with the most credit worthy customers (famous or long-standing businesses) may get bigger advances.
The discount rate. This is the fee which is a percentage of the value of the invoice. This may be a fixed rate, or a variable rate depending on the prime rate. Some conditions may also be specified which may affect the rates for certain invoices.
Additional fees. Different factoring companies charge different fees. Some, for example, may require an audit of your accounts receivable practices to see if you are doing it correctly. Such an audit may come with a fee. Other fees may include a charge for each invoice, or a termination fee when you want to end the agreement.
Disbursement of reserve amounts. The reserve is the rest of the payment, less the fess demanded by the factor. A day may be set aside for disbursement. Payment methods may also be specified (the funds may be deposited directly into your bank account.
The length of the commitment. Some contracts require a long term commitment for two years or more. You may have to pay a hefty termination fee if you end the relationship prematurely. Others have no minimum time frames at all. The contract may be month to month, and you may end the factoring agreement after the month.
The collection of the payments may also be detailed. Most factors insist on doing the collection themselves, although sometimes the collection may be done by your company of you want to ensure that the payment is done professionally and courteously. However, a factor almost always insists that the payments must be sent directly to them.

Before you sign any contract, you need to make sure that when you get a factoring term sheet that’s clear and accurate. You may want to hire a lawyer to explain the term sheet to you and determine whether the terms are beneficial to you or not.

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Factoring for Doctors: Is This Your Best Option?

Doctors who run their own clinics invariably need money to continue their practice. That’s a problem inherent in the industry, since insurance companies are the ones paying the bills and they are notoriously slow payers. Sometimes they don’t even pay the bill in full. This is why many doctors ask for loans, and why factoring for doctors has become immensely popular.

But if you’re a doctor, do you try to get loan or do you take advantage of the services of a medical factor?

Loans for Doctors

Some lending institutions offer loans specifically for doctors. Like most loans, you get a specific amount and then you pay every month. What you need is a steady stream of patients, and every month should bring in enough cash to enable you to make your monthly payment for the loan.

The loan amount you get depends on several factors. How long you’ve trained, your work experience, and even your specialty can affect this amount.

Medical Factoring

Technically, this is not a loan at all. The medical factor takes your invoices, and in return you get an advance on the value of the invoice. You may get as much as 80% of the value right away. The last 20% will be sent back to you once the insurance company pays the amount on the invoice in full, minus the fees for the medical factor.

For some clinics, the advantage of medical factoring goes beyond merely getting an advance. Medical factors deal with the insurance company, and they take care of the payment collection. This allows you to fully concentrate on providing the right care for your patients. You won’t have to hire additional employees to collect the payments for you.

Conclusion

So which is better for you? It all depends on what you need the money for, and what’s actually available for you.

Let’s say for example you need the money to expand your business (or buy a high-end medical equipment), or you want to take care of a debt that’s charging you a very high interest rate. Then in all probability you’ll need a medical loan. You can take the time to apply for the loan, and since it’s a one-time problem you can afford to go through the excruciatingly complicated loan application process.

But if you have a working cash flow problem, you’ll need either a line of credit or a medical factoring service. Since a line of credit can be very difficult to set up and there may be a limit involved, your only other viable choice is factoring.

With factoring for doctors, there’s no real limit except for the value of the invoices you’re pulling in. The higher you charge your patients, the more leeway you get in terms of the advance money you will receive. Once you’ve set up a factoring line for your business, you don’t need to reapply for more advance funds if you need them. You only need to give the factor more invoices.

Need Medical Factoring? Click Here or Call 1-888-382-3766 for a fast quote

How to Get Low Rates for Medical Factoring

For many doctors who are just starting their private practice, as well as for hospitals and nursing homes, it may not be easy to get the startup capital or operational cash flow needed to operate your business. When banks aren’t as open and enthusiastic about lending money to medical professionals and businesses, factoring becomes the only real possibility. You just have to hope that you get low rates for medical factoring so that you don’t overpay your financing.

Sure, the more innovative medical companies get millions in financing, but for most health clinics it doesn’t come easy. There’s also the very distinct possibility that you haven’t paid off your student loans yet. And if that’s case, the government may even ban you from billing Medicare and Medicaid to get you to pay back your loans first.

But how do you get low rates? It’s not as easy as just checking Google for low rates, however. Just because a factor boasts that it offers rates as low as 1.5% a month doesn’t mean that such a rate will apply to your business.

What you need is the right medical factor, that’s already configured to specialize in your industry. Here are some things you need to check:

The factor should have extensive experience working with companies or clinics like yours. By doing so, you’ll know that the medical factor knows which procedures and processes work best in your case. They already have a basic working system in place, and all they need to do is to tweak it to fit your situation. They don’t have to set up a brand new system from scratch. That’s means less work for them, and lower rates for you.
They already have prior experience with health insurance companies you normally deal with. Factoring provides you with the advance money you need to run your clinic, but it all depends on whether the paying customer actually pays on time.

For doctors that usually means insurance companies. You may be able to get low rates if the medical factor has worked with these insurance companies before, and the factor has confirmed that the insurance company does pay in full and on time. They no longer have to do extensive background checks on the insurance companies, as this has already been done before. It also assuages any worries that they won’t get paid back.

It also helps if you only deal with a select group of insurance companies, which helps lessen the worries of the medical factor. The more insurance companies are involved, the higher the risk of not getting paid.

You give them high-value invoices. It would be better if you have only a few patients, but each one owes you a lot of money for your services. This is better than dealing with numerous invoices worth very little money. For the medical factor, each invoice requires the same amount of work to process, so it would be beneficial for everyone if you only submit high value invoices.
You have a long term relationship with the medical factor. Medical factors charge more for short term deals. It might be better to find a factor you can trust and do business with them for the long haul.

Find the right medical factor, and you’ll get comparatively low rates for medical factoring.

Need Medical Factoring? Click Here or Call 1-888-382-3766 for a fast quote

Purchase Order Financing for Medical Companies

There are about 6,500 medical device companies in the US, and surprisingly most of them are small and medium-sized businesses. Majority of these medical companies have less than 50 employees. Also, many of them have little or no sales revenue yet. This is especially true for start-up companies, which make financing almost impossible. But that’s where purchase order financing for medical companies can help.

The Need for Financing for Medical Companies

The world medical device market is huge, but the US market remains the largest. It has a market size of $110 billion, and it’s projected to increase to $133 billion by 2016. The US has a net trade surplus with exports exceeding $44 billion in 2012. It also directly employs 400,000 Americans directly and about 2 million workers, indirectly.

But the entire industry is in trouble, due to the health care crisis and subsequent public policies. That includes a rather harsh 2.3% excise tax. It requires the payment of an additional $1 billion from the medical device industry. What’s harder to accept is that the tax is based on gross sales.

Imagine that you have gross sales of $1 million and your profit is only $100,000. Since the tax is based on the gross sales, that means you need to pay the government $23,000. You lose almost a quarter of your profits on tax!

Purchase Order Financing

With purchase order financing, the PO serves as a guarantor that the advanced loan will be paid. What’s important here is not the credit worthiness of your medical company. All you need to demonstrate is that you can fulfill the order. What’s more important is that the customer who made the purchase order can be trusted to pay the bill once the order has been delivered.

The lender can advance as much as 50% of the value of the purchase order, but some lenders may offer more. The typical financing rates average at about 3% per month (30 days). The rates are applied on the funds used—the lender pays the suppliers of the medical device company directly.

Benefits of PO Financing

In the medical industry, supplies and equipment form an integral part of adequate health care. Knowledge is well and good, but to help patients you also need supplies such as gloves, as well as expensive equipment like MRIs and CAT scans. There will always be a high demand for such modern devices.

As you can see, the main benefit of purchase order financing for medical companies is that you get the money you need to complete a purchase order. You don’t have to refuse a client simply because you don’t have the money to buy your raw materials and supplies. Refusing such orders can be costly for your business and it can mar the reputation of your company. You can also miss out on future purchase orders after you’ve met this first order. Financing a medical company these days may be difficult, but options like PO financing are always available.

The Benefits of Invoice Factoring for Technology Staffing Firms

There are many types of IT staffing firms. Some technology staffing firms provide temporary personnel for companies involved in short term projects. They don’t want to hire a permanent worker because after the project is completed they won’t need that particular worker anymore.

Other tech companies find that some jobs simply have high turnover. They need tech staffing firms to make sure that they always have someone reliable in that position.

Then there are IT staffing firms which act as recruiters for tech companies. They don’t get paid until the people they recruit are hired. Some tech companies don’t want to deal with the pre-hiring costs, and they use tech staffing companies to find or train good people.

All these types of firms will need lots of working capital in order to operate effectively. Since banks are not always reliable sources of business loans—they take too long, they need lots of collateral, and they don’t often approve of loans in the end—invoice factoring for technology staffing firms has become very popular.

How Factoring Works

Invoice factoring for technology staffing firms is very simple. As a staffing firm, you provide workers for tech companies. You have an invoice for this service, and you sell these invoices to a factor. The factor gives you 70% to 85% of the value of the invoice, so that you don’t have to wait 30 days to get most of your money. You only have to wait 30 days for the rest of the payment. When the customer pays in full, the factor gets back the money they advance to you and then they take their cut. You then get the rest of the payment.

The Difficulties for Tech Staffing Firms

There are many reasons why tech staffing firms are always in need of working capital.

Many IT people who work for staffing firms are actually looking for permanent jobs. This is natural, since on average a permanent worker earns considerably more than a worker for a staffing firm. They can work for a tech company for a while even as the company sees if they are a good fit. If that’s the case, they make an offer for the worker so that they leave the staffing firm.
This means that staffing firms are always looking for new talent.
It’s hard to find new talent, because the best in the field know that they are in such high demand among tech companies. Usually, a good tech worker is already employed, and getting them to work for a staffing company can be hard.
To entice some IT workers, staffing firms may offer more reasonable wages and they may want to look for more “exciting” jobs, such as working for a video game company or for a Hollywood firm. All these efforts will cost money.
You need to make sure that you have topnotch recruiters. These are the people who approach IT talent, and they need to have the ability to convince talented people to work on a per project basis.
With invoice factoring for technology staffing firms, you can make sure that your recruiters and the people they recruit are all paid well so they will want to work for you.