If you’re a healthcare facility or other related business in the medical field, then you’ve almost certainly encountered billing and cash flow problems. It is a patient-centered business, after all, and payments can be late or even fall into default. How to solve this, then? Medical factoring is a viable mechanism for doing so – and it also tends to improve business-consumer relations.
The Problem With Payments
In a nutshell, payments take time. Most medical businesses have to wait anywhere from 30 to 90 days to receive payment for services rendered; this can seriously hamper cash flow. Medical factoring plugs this gap by off-loading the payment collection responsibilities to a factoring company, which pays you (most of the) amount on your receivables. Let’s see how this works.
The Medical Factoring Process
After you first find a factoring company by comparing rates and other pertinent attributes, you then enact the transaction:
Send your claims to the factoring company; basically, your accounts receivable.
Once received – assuming there was prior approval, of course – the medical factoring company will pay you about 80% – 90% of the value of your accounts.
You can continue with business as usual, with your cash flow shored up; meanwhile, the factoring company holds on to the claims until they reach maturity and are recompensed by your clients.
After between 30 and 90 (usually; sometimes it can be longer) days, the factoring company will send you the rest of the 20% – 10%; minus their administration/financing fees.
The Evaluation Process
Although there are several different criteria you must meet to have access to the services of most medical factoring companies, these criteria are easy to qualify for. The part where due diligence is of paramount importance is in your search for the factoring company that best suits your needs. Some will be more expensive based on volume; so much so that it may not be worthwhile if you have just a few clients. Generally, however, medical factoring is a very good cash flow solution for the healthcare business.
Contact Means Commercial Capital today to learn more about medical factoring.