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Financing for Medical Practices

It’s common for medical practices to encounter cash flow problems during their first years of operation. While medical practices can be profitable, their cash flow is often difficult to manage.

Why is cash flow a problem?

Most expenses, such as renting a medical office, paying staff, and buying medical supplies, are predictable and must be paid regularly. Revenues, on the other hand, are less predictable and tend to trickle in. Most private insurance companies pay claims in 30 – 120 days. The fact that payments can come in anytime between 30 and 120 days makes forecasting revenues difficult.

The only way to operate a practice under these conditions is to have a cash reserve. The cash reserve acts as a buffer and helps you pay expenses while you wait to get paid. However, building a cash reserve is difficult, especially for new or small medical offices.

One thing that can make this problem challenging is that it happens when you least expect it – when you are growing quickly. This challenge arises because you are paying out expenses at a faster rate than you are getting paid.

There are only two alternatives

Unfortunately, this type of problem does not resolve itself. You only have two options. One option is to increase your cash reserve by investing additional funds. This approach can be hard for new offices where doctors have already invested their life savings into the business.

The second option is to supplement your cash flow with financing. You can secure financing with doctor loans, though loans are not always the best solution for cash flow problems. A better financing alternative is to use medical receivables factoring.

Medical factoring provides working capital

Medical factoring provides working capital by financing your slow-paying medical insurance claims. Instead of waiting up to four months for payment, you get immediate funding from the medical factoring company. This accelerated payment provides predictable revenues and allows you to better manage your practice.

How does medical factoring work?

Factoring finances your medical claims in two installments. The first installment is deposited to your bank account soon after you submit the batch of claims. The first installment ranges from 70% – 80% of the net payable value of the claim.

The second installment rebates the remaining money, less fees. This installment is deposited to your bank account soon after the insurance companies pay the claims on their regular schedule. For more information, read “What is Medical Factoring?

What are medical factoring’s advantages?

Financing your medical receivables has benefits over other solutions, including:

  • The solution is designed to solve cash flow problems
  • The line adapts to your growth with fast increases
  • The solution has easy qualification criteria
  • The line can be obtained quickly

Would you like more information?

We are a leading medical factoring company and can provide you with a competitive quote. For more information, get an online quote or call us toll-free at (877) 300 3258.

 

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