The technical definition of factoring is the ‘conversion of accounts receivables into cash by selling outstanding invoices to a factor.’ Moreover, factoring is a practical financing solution for any kind of company in the early stages of business development and /or during rapid growth because it gives companies immediate cash to manage operations more efficiently. Specifically medical supply companies can greatly benefit by factoring their receivables. In fact, listed below are six benefits of medical supply invoice factoring:
- Medical supply accounts receivable factoring is a way to fill the gap between when your company delivers a product and when your customer (i.e. doctors’ offices and medical facilities) pay. To elaborate, a medical supply factor can turn weeks or months of waiting to be paid into hours or days.
- Medical supply accounts receivable factoring is based on your customers’ credit history, rather than your personal credit or your medical supply company’s credit. As long as your company sells its medical supplies to creditworthy customers, then your business is a good candidate for accounts receivable factoring. .
- The medical supply factor process is a simple, fast method to sustain your “business as usual” relationship with your customers. Your company can continue to provide medical supplies to your customers with set-term payments; but with factoring, you no longer have to wait to be paid. Working with a medical supply factor allows your business to easily obtain cash advances of up to 95% of the invoiced amount. Additionally, cash can be obtained within hours and as often as needed.
- Medical supply invoice funding is one of the oldest methods of providing working capital. Dating back 4,000 years, factoring has long been used as a feasible and easy way for businesses to obtain cash flow in order to cover expenses while experiencing periods of growth.
- Medical supply accounts receivable factoring offers a chance to obtain cash without providing personal collateral or increasing interest expense. Invoice factoring is not a loan and does not “muddy up” your medical supply company’s balance sheet. You do not accrue interest or penalties. The factoring fee is clear and objective; it is based on the size of the medical supply invoice, the length of time it takes to collect on that invoice, and the creditworthiness of your customers (i.e. healthcare providers).
- Medical supply invoice factoring is also a great opportunity to build your company’s credit. With adequate cash flow, you can use money from medical supply factoring to clean up your debts as well as pay overhead, salaries and invoices. This will improve your medical supply company’s credit history and make it easier to obtain credit from vendors and other financial institutions in the future.
When you partner with a factoring firm that understands the medical supply industry, you will be able to maintain a balanced and healthy cash flow, while simultaneously building up your company’s credit. Medical supply accounts receivable factoring is a great long or short-term financing solution for small and mid-sized businesses. In addition to funding, factors can help build credibility with your clients and represent you as a well-established medical supply firm. Working with a medical supply factor can solve your cash flow problems, which gives your business both the time and money to focus on critical success factors — operations, sales and growth.