Third-Party Healthcare A/R Factoring
A Guide to factoring third-party payees in Healthcare
Is Healthcare A/R Factoring right for your medical service business?
All businesses that sell on terms have cash flow problems. At Bankers Factoring, we understand the acute working capital problems healthcare providers face because of the extended 90-to-180-day payment terms from third-party payees.
As a healthcare provider, you are susceptible to lacking the critical working capital and endure immense financial challenges due to outstanding account receivables from slow-to-pay customers as well as insurers and government bodies.
Fortunately, there is an external funding solution that can solve these issues for you. Healthcare factoring is a modern financing solution that you can take advantage of to manage your cash flow optimally and get rid of these severe financial shortages that limit both your growth and success. So, let us get through the different challenges faced by the medical industry and how invoice factoring can help you overcome them.
What challenges are faced by the Medical Industry?
When talking about the healthcare industry, it includes all companies and individuals offering health care services, equipment, or supplies. The main and common challenge they all faced is the lack of enough working capital for them to not only cover their daily activities but also to invest in their growth, due to their typical dependence on insurance companies and government agencies’ delayed payments.
Are any of these challenges familiar to you?
- Doctors, group practices and urgent care clinics: Struggling to keep up with the overheads for your office operations? Are you lacking working capital to cover salaries and pay suppliers?
- Nursing homes: Too many expenses to maintain your staffing level? Finding it hard to keep up with the continuous operating costs?
- Diagnostic and imaging centres: Having difficulties managing both your overheard and operating expenses as well as the dramatic monthly lease cost of your diagnostic equipment i.e. X-ray, MRI, CT scan…?
- Physical therapy and rehabilitation centres: Cash flow issues due to payments for equipment, suppliers, facilities, and operating costs?
- Home healthcare agencies: Lacking a continuous source of cash to cover your weekly payroll costs for the nurses and care aids working for you?
- Companies providing home medical equipment: Missing out on equipment sale or rent because you are unable to acquire new equipment and therefore sale or rent it because of cash shortage due to delayed payments?
As a health care provider, not only you are challenged by the numerous operating expenses and working capital requirements, but also constant changes in technology and different capital allocations’ demands, including:
- Government-mandated electronic medical records
- Modernization and expansion of facilities
- Staff training
- Regulatory policies changes requiring capital expenditures
- Need for continuous equipment updates or replacement to meet new standards
All these challenges that vary from cash shortages to a need to keep up with the new technologies make it vital for you, as a care health provider, to have a continuous, dependable, and cost-effective source of finance.
How can medical invoice factoring help you overcome these challenges?
Accounts receivable financing, also known as factoring or invoice factoring, is a branch of debtor finance that grants you funding based on your outstanding account receivables. It will offer your healthcare practice or institution a rapid cash infusion against your creditworthy invoices.
The traditional lenders will only provide you a loan if you can provide substantial collateral; factoring companies buy your creditworthy invoices and give you an instant influx of cash without the burden of the extra monthly debt payment.
Your approval can take as little as 24 hours and you will receive an upfront payment, up to 90%, based on the value of the invoices you have decided to factor. After 60, 90, or 120 days, your factoring company will collect the debt from your customers in accordance with the initial terms of the invoices and send you the remaining balance minus the receivables financing service fees.
Through factoring, your health care provider business will receive money on a continuous basis with no strings attached; meaning that you are free to use that money to cover your daily operations, upgrade your technology, take advantage of growth and expansion opportunities, or any other business purposes.
To simplify the process for you, here is a set of frequently asked questions about our healthcare factoring program.
What is the cost of selling my medical receivables? The cost is typically based on the value of your creditworthy invoices as well as the time elapsed from the funding date to the invoices’ payment date. 1-3% per 30 days is the typical pricing based on volume and dilution.
How soon will I get the funds? Establishing an account usually takes 1 to 7 days for a medical factoring transaction. Once approved, funding can take as little as 24H for your submitted creditworthy invoices.
Do I have to sell all my medical invoices? No, you can sell as many or as few account receivables as you would like.
What is batch funding? Instead of submitting each invoice separately, it is preferred to submit the invoices you chose to factor in a batch format for payment approval.
How much is the advance I will receive? An advance can be up to 90% of your approved creditworthy account receivables.
What happens when customers’ payment exceeds the invoice value? When we receive payment from your customer, any extras that exceed the amount advanced plus fees will be refunded to you.
What are medical invoice factoring benefits? Invoice factoring/AR financing allows your health care provider business to face all financial challenges and cash inflow management issues along with providing you with the ability to take advantage of growth and expansion opportunities.
Through invoice factoring, you can meet your overheads and operating expenses, prevent cash shortages, and ensure your healthcare business’ survival and growth. The benefits of medical A/R factoring are:
- Up to 90% upfront payment
- Same day funding
- Leverage your accounts receivables
- Fast access to cash and continuous working capital
- Flexible negotiable terms
- Reasonable service fees
- Professional receivable management and industry experience
- Based on your clients’ creditworthiness
- Factoring is not a loan. Less debt on your balance sheet.
- Funding grows as your receivables grow
- You select what invoices you want to be factored
Ready to factor your third-party medical invoices? Bankers Factoring medical invoice factoring program is available to any healthcare business with net monthly receivables from $100,000 to $10,000,000 payable in up to 120 days by any one of the following:
- Insurance companies
- State workers’ compensation insurance companies
- Managed care agencies
- Medicare or Medicaid
- State and local government contracts
- Nursing Homes & Assisted Living Facilities