5 Myths about Health Care Factoring BustedPosted by Factor Funding Co. on February 24, 2015
As a health care business owner, you understand the care you must take in regards to your finances and your company's reputation. You want to keep the trust of your clients, yet also keep your options open when it comes to adding money to your cash flow.
Because of certain myths that exist about health care factoring, you may have avoided considering this option until now. You can move ahead with getting the money you need to run your business without sacrificing your company's integrity or security by understanding why these health care factoring myths ultimately prove to be false.
1) Health Care Factoring Is Too Expensive
The myth that health care factoring is too costly proves to be one that keeps potential clients away from this valid source of financing. They mistakenly believe that they will end up paying steep annual percentage rates instead of realizing that their fees will be based on an affordable and realistic monthly percentage.
For example, if you sell your medical invoices at a rate of three percent each month, you may believe that you will be paying an APR of 36 percent. However, in all reality you pay this fee on a monthly basis instead of yearly. Even more, you probably will have your factoring loan paid off within a year's time and not come near to paying a 36 percent APR at all.
2) Factoring Is Too New and Risky
People who are not familiar with factoring may equate this transaction with the newer and riskier forms of personal financing available on the Internet and elsewhere. Factoring has actually been around for centuries, even as long as 4000 years as estimated by many scholars. It is not a new form of financing at all, but a tried and true method for businesses to get cash quickly.
Even more, this transaction is not at all risky because it is based on the value of the invoices you sell. You can sell some or all of your medical invoices or even sell them on a bulk or case-by-case basis. You have complete control over the transaction from the start and do not stand to lose collateral like your house or car as you might with traditional financing through a bank.
3) Factoring Will Sully My Company's Reputation
You may be hesitant to consider factoring because you fear what your clients may think of you and your business. If anything, factoring can better your reputation, if not maintain its current status by helping you avoid financial difficulties in the future. Further, factoring offers your company benefits like:
- Demonstrating your clients' creditworthiness
- Reassuring your customers that you have money on which to operate
- Proving that your company is viable and can secure outside financing as needed
- Showing your customers that you are proactive and ready to protect your interests and theirs
Because factoring is a well-known financing option, many of your clients may think nothing of your factoring your invoices. You do not stand to lose your company's good reputation by taking advantage of this source of cash.
4) Factoring Will Cost You Customers
Just as with the myth of risking your reputation, you may fear that factoring will cost you your valued customers. You may believe that they will walk away from your business because you sold your invoices to a factor.
However, you may be surprised to learn that the exact opposite will happen if you choose factoring. You will have more time to cultivate your relationships with current customers and focus on recruiting new clients to your company. You will not have to spend time sending out collection letters, making phone calls or otherwise trying to collect on balances owed to you.
5) Factoring Requires a Long-Term Commitment
Many people wrongly believe that factoring requires that you keep making payments for months or years at a time. You think that the factor will be an ever-present concern in your life and that you will be under the terms of your factoring contractor for a longer commitment than you may prefer.
In reality, it generally takes a year or less to pay off a factor loan. Once your factor collects on the accounts receivables, it releases you from your contract and gives you the option to sell more invoices to raise more cash if you wish. You can either take up this offer or end the business relationship with the factor entirely.
Dispelling these myths surrounding health care factoring can help you feel more comfortable about this finance option. You can get access to the money you need to bulk up your cash flow without risking your reputation or your company's security by utilizing factoring today.