More than most industries, healthcare can benefit from medical factoring. This is because so much of their working capital and cash flow come from medical insurance companies, which can take up to six months to render payment. This long lead time can be a big detriment since the medical facility is still responsible for paying for day-to-day expenses – just like any other business. Let’s see several ways in which medical factoring actually helps.
First and Foremost: Medical Factoring Improves Cash Flow
By using factoring receivables, your outstanding medical insurance claims become collateral for the issuing company. The money you are able to receive quickly from the insurance company lets you stay up to date with overhead payments, as well as keeping your cash flow in the positive. Especially in the medical field, finances are something that needs to be reliable and predictable.
Understanding The Process
For the price of the finance fee, you can keep your cash flow steady by using a medical factoring company. The mechanism is thus: the company sends you the bulk of the price of your outstanding medical insurance claim payments – a loose industry standard is about 75% – and then they become responsible for getting the rest of the money from your patients. The remaining 25% is sent to you once this process is concluded. As for the finance fee, this depends on several factors; but you can be assured that increased volume leads to a lower overall price.
This isn’t really an audit – although several elements are closely related. The medical factoring insurance company will send representatives to your business to take a look at how your operation is conducted; this can take up to a month. Afterwards, both you and the company will be able to pinpoint the cost of the procedure and whether it’s worthwhile.
Medical factoring is more viable than traditional loans, since it can be used even if you have financial issues like negative cash flow, taxes, bankruptcy, and more. Contact Hornet Capital Solutions to learn more about medical factoring.