Factoring for the Healthcare Industry
Turn Your Receivables Into Cash
Instead of waiting 30, 60, or 90 days for payment from hospitals, physicians’ offices, nursing homes, and other healthcare institutions, businesses can sell their accounts receivable to obtain funding within 24 hours. The sale of receivables, known as ‘invoice factoring’, provides an effective source of cash for growth, or other activities, when current working capital and alternative capital sources are inadequate. Finding factoring information on the internet can be difficult and many sites can be misleading — but don’t worry!
The links below provide factoring information that can explain how factoring can benefit your medical or healthcare company. If you already know you need PRN Funding‘s invoice factoring services, contact us today.
- What is Factoring?
- Factoring Process
- Benefits of Healthcare Factoring
- Factoring Impact on Bottom Line
- Is Healthcare Factoring for You?
- Customer Reaction to Factoring
- Factoring Terminology
PRN Funding is committed to making your medical invoice factoring process as simple and easy as possible. If you have questions, concerns or just want to talk through your options with a human, give us a call.
We work with a variety of medical-centric B2B companies including medical staffing firms, home care businesses, medical coding companies, private duty care sources and more. We also work with companies that work with large vendor management systems.
Do Startups Qualify?
Startups and small businesses often wonder if they qualify to sell their account receivables. The good news is that startups can indeed participate in this practice. Regardless of the number of years a startup has been in operation, if they have outstanding receivables from creditworthy customers, there are options available to them to increase their working capital and address cash flow issues promptly.
If you are a growing startup or a small business with outstanding receivables, you can take advantage of our services. We specialize in assisting startups and small businesses, offering the necessary support to maximize their financial resources. Whether you have been in operation for a short period of time or are a more established startup, we can help you increase your working capital effectively.
To determine if your startup qualifies for this opportunity, all you need to do is submit a quick factoring quote request. Within hours, you can receive approval for invoice factoring and can start benefiting from the immediate resolution of your cash flow challenges.
Selling Accounts Receivables VS. Bank Loan
When comparing different options for covering cash flow needs, including selling accounts receivables, receivables financing, and bank loans, it can be said that selling accounts receivables, also known as factoring, offers some distinct advantages.
Receivables financing is essentially a loan that uses your accounts receivables as collateral. By entering into a receivables financing agreement, you still retain ownership of the receivables, responsibility for collecting payments from customers, and making payments to the financial institution. This option adds debt to your books.
On the other hand, factoring, which involves selling accounts receivables, does not create additional debt. Instead, a factoring company buys your accounts receivables, providing an advance on the capital and awaiting the arrival of payment. Once the cash is received, the factoring company deducts a discount fee based on a pre-agreed discount rate and promptly deposits the remaining balance. Factoring is not a loan but rather the purchase of your receivables at a discounted rate.
If the goal is to avoid adding debt to your ledgers, selling accounts receivables through factoring is a more advantageous option than receivables financing or bank loans for cash flow needs. It provides immediate access to capital without incurring additional debt, offering potential benefits for businesses looking to manage their cash flow effectively.
What Do You Need To Qualify?
To qualify for factoring, you need to meet certain criteria and fulfill specific requirements. These include:
- Selling products or services to other companies: Factoring is typically available for businesses that sell to other companies rather than individual consumers.
- Payment terms of 90 days or less: Factoring companies prefer invoices with shorter payment terms, typically within a 90-day period or less.
- Customers with good to high credit rating: To increase the likelihood of approval for factoring, it is beneficial to have customers with a solid credit history. This assures the factoring company that the invoices being financed are less likely to go unpaid.
- Maintain a minimum monthly sales volume: Most factoring companies have a baseline monthly sales requirement, typically around $5000. This ensures that the business seeking factoring services has a consistent and sufficient level of sales activity.
By fulfilling these qualifications, businesses can enhance their chances of successfully qualifying for factoring and accessing the benefits it provides.
How To Sell Your Receivables To A Factoring Company
Selling your accounts receivable to a factoring company is a straightforward process that can provide you with immediate cash flow. Here’s a step-by-step guide on how to sell your accounts receivable to a factoring company:
- Research and Choose a Factoring Company: Start by researching and identifying reputable factoring companies that specialize in your industry. Look for factors that align with your business needs and have a track record of reliable service.
- Complete the Application: Once you’ve selected a factoring company, you’ll need to complete their application process. This typically involves providing information about your business, such as financial statements, customer invoices, and credit history. The factoring company will evaluate your application to determine if you meet their requirements.
- Sign the Factoring Agreement: If your application is approved, you’ll need to sign a factoring agreement. This agreement outlines the terms and conditions of the factoring arrangement, including the fees, advance rates, and any restrictions that may apply. Be sure to carefully review the agreement and seek legal advice if needed.
- Submit Invoices to the Factoring Company: After signing the factoring agreement, you’ll start the process by submitting your customer invoices to the factoring company. These invoices represent the accounts receivable that you want to sell. It’s essential to ensure that the invoices are accurate and include all necessary details such as the customer’s name, amount due, and payment terms.
- Receive an Immediate Cash Advance: Once the factoring company receives your invoices, they will review them and verify their authenticity. After the verification process, the factoring company will advance you a percentage of the invoice value, typically ranging from 80% to 90%. This advance provides you with immediate cash flow to meet your business needs.
- Factoring Company Collects Payment: When the invoice payment is due, the factoring company takes responsibility for collecting the payment from your customers. They handle the collection process, including sending reminders, making phone calls, and following up on any outstanding payments. This allows you to focus on running your business without the administrative burden of collections.
- Receive the Remaining Balance: After the factoring company successfully collects the invoice payment, they deduct a small factoring fee, which covers their costs and services. The remaining balance, representing the remaining invoice amount, is then paid to you.
- Repeat the Factoring Process: You can continue to sell your accounts receivable to the factoring company on an ongoing basis, as long as you have cash flow needs. This flexibility allows you to access immediate funds whenever necessary, ensuring smooth operations and growth for your business.
Remember, it’s crucial to carefully evaluate different factoring companies, compare their terms and fees, and choose the one that best suits your specific business requirements. Additionally, seek professional advice to fully understand the potential impact of factoring on your financial statements and overall business strategy.
Why Sell Your Receivables
Companies sell their receivables for a variety of reasons. One major motive is to address temporary cash flow needs while they await payment from customers. Selling accounts receivables enables companies to access immediate funds for critical purposes such as purchasing inventory, funding payroll, making capital expenditures, and meeting payment obligations to vendors and addressing miscellaneous expenses. It provides a practical solution to bridge the gap between the time a sale is made and the time payment is received. By converting their outstanding invoices into cash through the sale of receivables, companies can effectively manage their short-term financial obligations and ensure the smooth operation of their business.