Although factoring is a great alternative funding option for any type of business, it’s an especially good financing choice for a healthcare business that sells medical supplies to medical facilities and physicians’ offices. Healthcare companies, which either provide goods or services to the healthcare industry or bill third-party payers, can greatly benefit from this. Selling invoices to a factor allows medical supply companies to get paid quicker without going into additional debt. Moreover, companies who factor their receivables won’t have to turn down orders anymore because medical supplies factoring enables them to have enough cash on hand to pay for those large orders.
Still not convinced? Check out our top five reasons for medical supply companies to factor their receivables.
Understanding Medical Factoring
Medical factoring is a financial solution specifically designed to help healthcare providers manage their cash flow and navigate the complexities of the medical industry. This process involves selling outstanding invoices to a factoring company in exchange for immediate cash. By doing so, healthcare providers can receive payment for their services without the lengthy wait times typically associated with insurance companies or client payments. Medical factoring is a popular financing solution among healthcare providers because it offers a quick and efficient way to access working capital, ensuring that they can continue to operate smoothly and meet their financial obligations.
Benefits of Medical Factoring for Healthcare Providers
Medical factoring offers numerous benefits to healthcare providers, making it an attractive financing option. Here are some of the key advantages:
Improved Cash Flow: Medical factoring provides healthcare providers with immediate access to working capital. This allows them to pay bills, invest in new equipment, and expand their services without the stress of waiting for payments.
Reduced Administrative Burden: By outsourcing accounts receivable management to a factoring company, healthcare providers can significantly reduce their administrative workload. This enables them to focus more on providing quality patient care rather than chasing down payments.
Increased Financial Stability: Medical factoring can help healthcare providers stabilize their finances by providing a steady cash flow and reducing the risk of bad debt. This financial stability is crucial for maintaining operations and planning for future growth.
Flexibility: Medical factoring companies offer flexible financing solutions that can be tailored to meet the unique needs of each healthcare provider. Whether it’s a small medical practice or a large healthcare facility, factoring companies can provide customized solutions to support their financial health.
By leveraging the benefits of medical factoring, healthcare providers can ensure they have the necessary resources to deliver exceptional care and grow their practices.
Reason #1: Get Paid Quicker with Medical Receivables Factoring.
Instead of waiting 30-60 days to receive payment after delivering medical supplies to a healthcare facility or doctors’ office, medical supply companies can utilize healthcare factoring to sell their invoices to a factor and receive cash within 24 hours of issuing an invoice. All a factoring firm needs to advance cash is a copy of the invoice and proof that the goods were delivered and accepted. This is easily accomplished with tracking numbers and digital signatures.
In the healthcare industry, this immediate access to capital helps providers manage cash flow challenges caused by delayed payments from insurance companies and government agencies, enabling them to cover operational expenses and invest in their practices efficiently.
Reason #2: Leverage Your Healthcare Providers’ Credit.
Medical supplies factoring is a great option for companies who are either just getting started or who have less-than-perfect credit. Rather than make a credit decision based off of the medical supply company’s credit, factoring firms determine their credit limits after reviewing the payment trends of the medical supply company’s customers. This is usually accomplished by using a third-party credit bureau, and it’s done in a non-intrusive way, giving medical supply companies the ability to secure financing based off of their customers’ credit rather than their own.
Medical receivables factoring is particularly beneficial for healthcare providers facing cash flow issues due to slow payments from insurers and clients. This financial solution offers faster payments for outstanding invoices, addressing the unique financial challenges within the healthcare industry.
Healthcare facilities, along with other healthcare providers, can utilize services like medical invoice factoring to manage their financial needs and enhance their operational capabilities. This allows them to focus on providing quality care without the stress of financial instability.
Reason #3: Stop Worrying about Accounts Receivable Collections.
Keeping up with collections of accounts receivables can turn into a full-time job, and it can become burdensome for a growing medical supply company to keep up with re-sending skipped invoices and keeping track of payments. Medical practices often face similar challenges due to slow payments from insurance companies and government programs. Many factoring firms offer bookkeeping services in addition to medical supplies funding. Rather than chase after payments, medical supply companies can focus on more important things—like growing the business.
Reason #4: Avoid Debt.
Unlike traditional lending models, accounts receivable factoring is not a business loan. Healthcare businesses, such as medical supply companies, do not borrow money from a factoring firm; rather, the factor legally purchases the medical supply company’s invoices at a discounted rate. The supply company simply issues its invoice, sells it to the factoring firm and receives cash up front, and then the factor collects on the invoice. No debt is created, so the balance sheet stays clean.
Reason #5: Never Have to Turn Down an Order Again Due to Cash Flow.
Perhaps the most appealing reason why medical supply companies and medical providers can benefit from factoring is that they will no longer have to turn down a new order. Cash flow gaps surface when a medical supply company has to order additional goods without being paid for previous orders. Factoring invoices helps close those cash flow gaps because the medical supply company gets cash within hours of verification instead of waiting weeks to be paid.
