The healthcare industry typically works with reliable but slow-paying customers. However, waiting weeks to months to receive payment can have an adverse effect on cash flow and growth potential. One solution to this difficulty is medical factoring, also known as invoice factoring. This can benefit medical providers such as physicians and dentists, and also vendors that sell medical goods and services. Here is some information that can help you decide if this method of financing is right for your business.

The Basics of Medical Factoring

Medical factoring involves selling your unpaid invoices to a factoring company in exchange for the immediate cash you need to meet your expenses. An alternative to this funding method is medical receivables financing, which offers you loans using your unpaid invoices as collateral.

How Medical Factoring Works

After you have sent out invoices to your clients, you apply for financing to a factoring company, which reviews your invoices and checks the creditworthiness of your patients and clients. You and the factor sign an agreement, and then you receive an advance of 80 to 90 percent of the value of the invoices. Usually, the factor handles collections. Once your clients have paid in full, the factor sends you the balance of payment minus its fee.

Benefits of Medical Factoring

One of the greatest advantages of using medical factoring is the ability for healthcare providers and vendors to stabilize cash flow and have funds on hand in times of need. You can use the working capital you receive from medical factoring for whatever would most benefit your business, including rent, utilities, equipment, supplies, employee’s salaries, and marketing. It will also enable you to have extra funds on hand for unexpected emergencies. Because the factoring company assists you with collections, you have more time to focus on the needs of your patients and your business.

For more advice on medical factoring and its suitability for your healthcare business, get in touch with Capital Funding Source.