Many providers and vendors in the healthcare industry have difficulties with cash flow due to slow-paying customers. Insurance companies often take weeks or even months to pay up. In the meantime, lack of working capital hinders the efficiency and growth of medical businesses. One solution to this dilemma is medical factoring. Here are some details about this form of financing to help you decide if it is a good fit for your medical company.
The Basics of Medical Factoring
Medical factoring is a form of invoice financing. Rather than wait for your clients to pay their bills, you sell the invoices to a factoring company. You then receive an advance of most of the value of the invoices and the balance when your customers have paid in full.
The Process of Medical Factoring
After your healthcare business sends out accounts receivables, you approach a factoring company. The factor will then conduct a review, during which they will assess the creditworthiness of your patients and clients. When your application is approved and you sign a contract, you receive 80 to 90 percent of the value of the invoices you have factored as an advance. Once your customers have paid their bills, you receive the balance of payments minus a factoring fee.
The Benefits of Medical Factoring
Medical factoring assists your healthcare business in maintaining strong cash flow. This means that you will have plenty of funds on hand for standard needs such as employee salaries, rent, utilities, equipment, supplies, marketing, and legal counsel. You will also be much better prepared to handle economic downturns, increased competition, equipment breakdowns, technological upgrades, and possible lawsuits. When you factor your invoices, you are prepared for emergencies like these because your income is steady and reliable. Additionally, since the factoring company helps you with the collection process, you have more time to provide quality care to your patients.
For more advice on medical factoring, get in touch with KPI.