Healthcare businesses like medical clinics and staffing companies rely heavily on their cash flow. A steady flow of money coming into your business lets you can invest it back into your business and take care of your patients sufficiently.
Unpaid accounts receivable, however, can threaten your viability and bring your cash flow to a halt. Rather than allow your medical business to be jeopardized, you can utilize factoring for these four important reasons.
Your cash flow can dwindle quickly within a matter of days. When you need money now, you may not have time to wait for a bank to approve you for a loan or your invoice clients to settle their unpaid accounts.
Medical factoring provides you with the fast money solution you need to keep your doors open. Many factor applicants can be approved within a few days' time, if not sooner.
Along with being fast, factoring also proves to be much easier for which to be approved. Bank loan officers put you through intense scrutiny and often will turn you down for blemishes like no collateral or poor credit.
A healthcare factoring company will not look at your credit rating so much as it will check out the rating and payment histories of your invoice clients. As long as you have unpaid accounts receivable, you typically can expect to be approved, especially if your clients have a history of paying their bills in a timely manner.
Unlimited Use of Cash
Once you are approved, you do not have to fear that the factor will restrict how you use your money. The cash is yours to do with as you wish. Healthcare businesses have used factoring to pay expenses like:
- Payroll for nurses, receptionists, lab workers, and other support staff
- Ordering supplies like gloves, bandages, and test strips
- Purchasing or renting new and more sophisticated equipment like x-ray machines and telescopes
- Insurance and utilities for your building
The factor will not require that you provide proof of how you spent your cash. The money is yours to do with as you please because you sold your accounts receivable to the factor.
No New Debt
Because you sold your unpaid invoices in exchange for money, your factoring transaction cannot be classified as a loan. In fact, factoring is not a loan in any way, which means that you avoid taking on any new debt that your business cannot currently handle.
Instead, factoring is the sale of your unpaid accounts in exchange for cash. You can expect to receive about 80 percent of the value of your accounts receivable upfront with the remaining 20 percent, minus factoring fees, paid after your clients settle their accounts. Once the accounts are paid in full, you can then sell more invoices if you need more cash for your business.
Choose an Experienced Factor
Just as you decide if factoring is right for your financing needs, you likewise should carefully consider which factor to work with during the transaction. In fact, you choose a company that has specific experience with medical factoring.
An experienced medical factor will anticipate insurers contesting invoices and perhaps delaying payment past the typical 30 to 90 day deadline. Despite these delays, an experienced medical factor will still be able to keep your fees affordable without charging you more or penalizing you in other monetary ways.
Healthcare businesses need a steady flow of cash to keep their businesses running smoothly. When you want to avoid staking your financial future on a bank loan, you can utilize factoring for these four key reasons.