Running any type of medical facility, where you are waiting on payment from insurance companies and government agencies, can cause stress. You are owed funds but those open invoices won’t keep the lights on or your residents cared for. If your assisted living facility experiences cash crunches from overdue invoices, or you simply don’t have the staff to track down every delayed payment, medical factoring is a solution.
What Is Medical Factoring?
Factoring is a service that has several benefits over a traditional loan. Instead of waiting weeks or months for funding that will require extensive collateral or an established business with perfect credit, factoring usually only takes a week or so from application to funding. Because it is not actually a loan, but the purchase of your accounts receivable, there’s never anything to pay back.
Factoring allows you to sell your accounts receivable to a lender who will pay you anywhere from 80% to 90% of the face value of the invoices. Your customers then pay your lender directly. Depending on the agreement you enter, you may even see part of that collected income on top of the percentage you already received up front.
What Are the Benefits?
Working with a lender that specializes in medical factoring means you can pass on the work of dealing with Medicare, Medicaid and insurance companies to a third party. While the fees for factoring can be high compared to a traditional loan, your assisted living facility can reap significant savings from not having the personnel required to wrangle with these third parties on a daily basis.
Besides removing the hassle of accounts receivable work, factoring means you are never invoice rich and cash poor. You’ll have regular cash infusions, allowing you to build your business credit with on-time payments. Your residents will never suffer because your business is strapped for cash to pay your nursing staff. You can even grow your business with facility upgrades, new marketing campaigns or extended staff.
Factoring lenders are not traditional banks, so it’s important to do your homework when you look for a lender. Look for hidden fees and discuss what happens with invoices that can’t be collected. It’s also important to know how the lender deals with Medicaid payments. Decide if your business will actually benefit from factoring or if it may be a slow but steady drain on your profits. Many assisted living facilities find that the benefits of factoring far outweigh the costs.