Instant Factoring Quote

As low as 1.15%

Article: Factoring Financing for Small Medical Offices

Starting a medical practice is an objective for many doctors, especially those who crave independence. Attaining this goal allows doctors to create a personalized atmosphere for patients, a fulfilling workplace for themselves, and a great working environment for employees.

However, running a medical office is difficult, especially from a financial perspective. Many offices are impacted by cash flow problems that often threaten the business. These problems can take a toll on everyone at the office.

Fortunately, one of the most significant – and most common – sources of cash flow problems can be fixed with the right solution.

Slow-paying medical claims

The most common source of cash flow problems for small medical offices is slow payments from insurance companies. Most doctors don’t plan for this problem when they begin their medical practices.

Insurance companies can take 35 – 120 days to pay claims. Because of slow payments, your office must have enough cash in the bank to cover expenses while it waits for payments. Few small or growing medical practices have the resources to handle this payment delay. Consequently, many practices experience financial problems and many small medical offices fail.

Furthermore, these problems usually affect a medical practice when it’s growing quickly and doctors least expect it. Expenses get ahead of revenues and, soon after, the practice is in a financial tailspin.

A business loan is not the right option

Most doctors try to fix these problems using a business loan. Doctors have many options since a number of companies provide doctor loans on competitive terms.

However, a doctor loan is not always the best choice – at least, not for this type of cash flow problem. A line of credit works better, but that solution has limitations as well.

Medical factoring improves cash flow

You can solve this problem effectively – and permanently – by financing your claims using medical factoring. This solution provides you with an advance using your claims as collateral. Instead of waiting up to four months to get paid, you get immediate working capital to pay for office expenses.

Medical receivables factoring has advantages over other solutions that make it an ideal solution for small medical offices:

  • It adapts and grows with your revenues
  • It has simple qualification requirements
  • It can be deployed quickly

How does medical factoring work?

Transactions are relatively simple. Medical claims are financed in two installments. The first installment, the advance, is provided soon after you send a batch of claims for financing. The advance ranges from 70% to 80% of the net payable value of the claims.

The second installment, the rebate, covers the remaining amount, less fees. The rebate is deposited to your account soon after the claims are paid.

Most medical factoring companies structure transactions as follows:

  1. You submit a batch of claims to the finance company.
  2. The finance company deposits the advance to your bank account.
  3. Claims are paid on their regular schedule in 30 – 120 days.
  4. The finance company rebates the remaining funds to your bank account.

You can learn more about the factoring process by reading “What is Medical Factoring?

Medical factoring works with private insurance companies

Medical factoring can finance claims from most private insurance companies and for different plans – HMO, PPO, and so on. The factoring company reviews the payment track record of the insurance company to determine if particular claims can be financed.

This type of financing can work with most insurance companies.

Medical factoring works with Medicare / Medicaid

In general, most claims from Medicare and Medicaid can be financed, though they can’t be assigned. This financing is done using a special process. For more details, read “Can Medicare and Medicaid Claims be Financed?

Build reserves

Ideally, you want to use factoring to improve cash flow and to give you enough time to build your own reserves. Once your reserves have been built, you should be able to proceed without financing.

Would you like a quote?

We are a leading medical factoring company and can provide you with competitive terms. For a quick quote, fill out this form. To speak with an expert, call us toll-free at (877) 300 3258.

Return to the Medical Factoring Resource Center.