Medical Factoring

Medical Factoring: Medical Practice Needs Financial Aid Too!

Opening a medical practice can be a financially challenging business venture. There is an incredibly slow billing cycle that is synonymous with medical insurance companies. Most medical insurance companies take no less than an average of 120 days to pay invoices that are due. This prevents most medical offices from expanding because they lack the finances to grow. Paying rent for office space, employees and equipment leases are not an inexpensive cost and in worst case scenarios, many medical offices have been put out of business. This is where medical factoring can provide a huge relief to the operations of any medical practice.

Medical factoring companies offer a viable solution to medical practices that are stuck for operating capital while waiting for invoices to be paid. In fact, medical factoring is the process in which medical invoices are sold for real working capital. Once a medical factoring company is presented with the invoices that require payment, they will assess the entire situation and release a percentage of the funds upon approval. The medical factoring company now assumes the wait for the invoice to be paid. This allows the medical office that is struggling to have the available finances and hire new staff in order to expand and grow. It also affords the medical practice to meet the recurring operating expenses such as payroll, rent and insurance expenses. All of these intricate workings demonstrate the invaluable financial tool that is available in medical factoring.

Although the medical factoring process may seem like it would be a particularly difficult one to understand, quite the opposite is true. The medical factoring company will request to see the applicable accounts receivable invoices and other applicable documentation. Once the medical factoring company assesses the information, an agreement will be drawn up between the medical office and the medical factoring company. At that point the medical office will furnish weekly invoice batches to the medical factoring company for immediate financing. The amount of the financing will be dependant upon the gross total of invoices and is usually around 80%. The other 20% is called a reserve and is kept by the medical factoring company until payment is received for the invoice(s). Once the medical factoring company receives the payment, they will issue another payment to the medical office for the remaining amount minus the financing fees previously agreed to in the initial agreement.

There are very few qualifying characteristics that are required when seeking a medical factoring company. Behind every simple story lies a more complex story line and the same is true with medical factoring. Most companies only agree to work with medical offices that have at least $75, 000 in accounts receivables. Typically, in order to be considered a shoe-in for the medical factoring specialty, the medical office should demonstrate over $250, 000 a month in gross receivables to get good terms and conditions.