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2011 will go down in history as the year the big banks stopped lending to small businesses. On the other hand, 2011 will also be remembered as the year alternative lenders came to the forefront of the small business financing industry. Specifically, credit unions, community development financial institutions (CDFIs), micro-lenders, accounts receivable financing firms, and accounts receivable factoring firms all said YES to the majority of their small business financing applications while most larger banks repeatedly said NO.
Although a home health care agency owner could be approved for financing by any of the alternative lenders listed above, the best alternative financing option for them is working with a home health care factoring company — here’s why:
What is Home Health Care Factoring?
Home health care factoring is a financial solution that enables home health care agencies to receive immediate cash advances for their outstanding invoices. This financing option is particularly useful for home health care providers who face delayed payments from government agencies, insurance companies, and other slow-paying customers. By selling their outstanding invoices to a factoring company, home health care providers can receive up to 90% of the invoice value within 24 hours, significantly improving their cash flow and liquidity. This immediate access to funds allows agencies to meet their financial obligations promptly, ensuring smooth operations and the ability to focus on delivering quality home health care services.
Home Healthcare Factoring Creates Positive Cash Flow
Home healthcare factoring is a robust solution that creates positive cash flow for home health care agencies. By providing a cash infusion without incurring debt, factoring enables agencies to breathe easier, knowing that assistance with collections is part of the package. Funding is typically provided within a day or two of invoice submission, allowing providers to focus on patient care and business growth.
With factoring, home health care agencies can channel funds into essential areas like training for home health aides, enhancing services, and expanding their business. This financial flexibility ensures that agencies can maintain high standards of care while pursuing new opportunities for growth.
Navigating Cash Flow Challenges in the Healthcare Industry
The healthcare industry is notorious for its cash flow challenges, particularly for home health care agencies. Delayed insurance reimbursements, administrative missteps, and inconsistent payment timelines from insurers can cause delays in vendor payments, damaging credit and supplier relationships. Home healthcare factoring offers a solution to these challenges by providing a consistent source of working capital to make payroll and pay ongoing business expenses. By factoring outstanding invoices, home health care agencies can unlock growth capital and maintain financial stability. This reliable cash flow allows agencies to navigate the complexities of the healthcare industry with greater confidence and efficiency.
Home Healthcare Factoring Helps Eliminate Overhead
In addition to providing capital, home health care factors provide invoice processing services, which include the following: posting invoices to a computer, depositing checks, entering payments, following-up on past-due invoices and producing consistent reports. Home healthcare providers can greatly reduce their current overhead costs associated with processing invoices and eliminate the overhead cost of handling collections when they work with a factoring firm.
Moreover, home health care agency owners can use the time they used to spend on collections, administration, bookkeeping, talking to banks, etc. to focus on marketing, sales and other business-growing activities.
Factoring Medicaid Receivables Helps Home Health Care Agencies Build Credit
As was previously discussed, home health care factoring provides agency owners with adequate cash flow. This newfound access to capital gives agency owners the ability to pay its vendors on time, helping them to establish a good credit rating and improve their financial planning. Having good credit will make it easier for vendors and other financial institutions to extend credit to the agency in the future. In addition, factoring home health care allows agency owners to take advantage of early payment discounts. For example, some vendors will offer a two percent discount if a home health care agency owner pays its bills within ten days. These savings can then be used to offset the cost of factoring.
Eventually, the big banks will start lending again. In the meantime, home health care factoring is a great alternative financing option for agency owners to utilize. Specifically, home health care factoring generates a positive cash flow, eliminates overhead costs and helps home health care agency owners build credit.
How Factoring Works for Home Health Care Agencies
Factoring for home health care agencies works by turning unpaid invoices into cash advances. Factoring companies purchase invoices at a discount and provide cash advances to the home health care provider. The factoring company then collects payment from the customer. This financing solution provides access to working capital when needed, rather than relying on customer payment timelines. Factoring companies fund invoices within 1 or 2 days, providing quick access to cash and allowing businesses to focus on growth and development. This streamlined process ensures that home health care agencies can maintain a steady cash flow and continue to provide essential services without financial interruptions.
Uses For Your Factoring Cash Advance
Receiving a cash advance from home healthcare factoring means businesses do not have to wait on customer payments to fund their business. This financing solution provides access to working capital when needed, allowing home health care agencies to:
- Make payroll and pay staff salaries on time
- Take on new jobs and expand their business
- Pay operating expenses, such as insurance, transportation, and equipment costs
- Invest in growth opportunities, such as marketing and new technologies
- Enhance patient care and services, such as skilled nursing care and home health aide support
By using factoring cash advances, home health care agencies can maintain financial stability, focus on growth and development, and provide quality patient care. This financial flexibility ensures that agencies can meet their immediate needs while planning for future expansion and improvement.