Last Updated on July 26, 2023
Healthcare workers and medical service providers sometimes must wait weeks or months to receive payment. While profit is a secondary motive for many medical service providers, long payment terms can lead to low-cash situations that put your business in a frustrating cycle of negative cash flow and mounting debt.
To keep growing your medical practice and treat patients, you need cash to make payments, purchase medical supplies, and meet payroll obligations. Fortunately, you can get all of those by selling medical accounts receivable through invoice factoring.
In this article, we discuss how invoice factoring for medical companies works, its benefits, and how it compares to other financing alternatives. Read on to learn how altLINE can help your medical company with medical receivables factoring!
What Is Medical Receivables Factoring?
Medical receivables factoring is when your company sells invoices to a third-party company like altLINE in exchange for a cash advance. This especially helps when your customers delay payment on your invoices, which may lead to negative cash flow that hurts your business. Medical receivables factoring is often used to access working capital whenever necessary without relying on customer payment timelines.
Benefits Of Factoring Medical Receivables
Factoring unpaid medical bills is a good way to improve cash flow and offset late customer payments. Check out how medical receivable factoring can help you access cash when you need it:
Get Your Accounts Receivable Invoices Paid In Days, Not Months
The best medical receivable factoring companies fund your invoices within 1 or 2 days. This means you can receive up to 90% of your hard-earned money ASAP instead of in 30, 60, or 90 days.
Access Capital To Grow Your Business While Maintaining Equity
Business owners often sacrifice equity to fuel company growth, but invoice factoring can set them up for long-term success. Medical receivable factoring cash advances help you pay expenses, fund growth initiatives, and fulfill payroll obligations without sacrificing valuable business assets or equity.
Get Cash When You Need It Most
Overdue invoices and late payments reduce cash flow, which often creates extra stress and jeopardizes your financial health. Invoice factoring offsets those late payments to increase your working capital, keeping your company financially healthy.
How Does Factoring Medical Invoices Work?
Factoring medical invoices through altLINE works by turning unpaid invoices into cash advances to finance your business initiatives. Additionally, submitting medical invoices for factoring softens the financial blow of late customer payments. Instead of waiting on customers to pay their invoices, you can use our medical receivables factoring services to get cash whenever needed.
Here is how you can qualify for our medical invoice factoring and financing services:
Submit Your Unpaid Account Receivable Invoices To Us
altLINE accepts all types of unpaid customer invoices, though we generally favor creditworthy customers. Additionally, we do not factor invoices for customers who consistently make late payments.
altLINE Advances Up To 80-90% Of The Invoice Face Value
You can generally expect a factoring advance rate of 80-90% of your invoice’s face value and receive the cash advance between 24 and 48 hours after submission to altLINE. The exact timing of your cash advance deposit usually depends on when you complete the treatment in question.
altLINE Helps Collects Payment For Your Outstanding Invoices
altLINE assists in monitoring and collecting customer payments. We provide a lockbox under your company’s name and report payments through an online customer portal. If issues arise, we can communicate with your customers to resolve disputes professionally, helping you maintain good business relationships.
altLINE Pays Out The Remaining Unpaid Invoice
After we complete payment processing and deduct our factoring fee (typically 1-5% of your invoice’s face value), we will transfer the remaining invoice balance to you.
Uses For Your Factoring Cash Advance
Factoring accounts receivable and medical bills means you do not have to wait on customer payments to fund your business and pay expenses. Instead, you can eliminate lengthy payment cycles and unlock growth capital sooner to accelerate business development.
Here are some ways you can use invoice factoring cash advances:
Medical staff are the lifeblood of your company – if you want to maintain morale and productivity, you have to pay them on time. Unfortunately, long payment cycles damage your cash flow and delay your payroll. Invoice factoring cash advances ensure you can consistently pay their salaries, preventing employee dissatisfaction.
Treat More Patients
You should not be forced to wait for customer payments to clear to treat more patients and grow your business. Cash advances from medical receivable factoring provide the funds you need to buy everything you need to accept new patients without sacrificing assets or equity.
Cash crunches make paying expenses like transportation, insurance, and equipment maintenance tough. Invoice factoring gives you cash advances to pay your obligations without having to depend on prompt customer payments or sacrificing equity.
Medical Businesses We Fund And Finance
altLINE offers medical factoring services for all kinds of businesses in the sector. Here are some examples of our services:
- Medical staffing factoring
- Home medical care factoring
- Medical equipment provider factoring
- Factoring for medical freight bills
- Factoring for medical coding companies
Medical Accounts Receivable Factoring vs Other Funding Options
In addition to invoice factoring, you have a few other medical bill financing options. In this section, we compare three alternative medical bill financing methods to invoice factoring:
Medical Receivables Factoring vs Bank Line Of Credit
A bank line of credit is typically the first financing solution chosen by most businesses. Your medical provider may qualify for a bank line of credit, but the funds it provides may not be enough to grow your business.
Banks usually look at your fixed assets to approve your line of credit application. As a medical company, you may have many devices and equipment that count as fixed assets. However, if you are a new company, you may not have much credit or assets built up, which makes qualifying for a line of credit tougher.
Medical receivable factoring is usually the better option if you are a new or growing company because factoring companies look at your customers instead of your assets to provide cash advances.
If you work with an established customer base, factoring companies will give you enough working capital when banks cannot.
Medical Receivables Factoring vs ACH/MCA Loans
ACH (automated clearing house) and MCA (merchant cash advance) offer online qualification based on your bank statements. They can provide funding within 1 or 2 business days but offer high interest rates that reach up to 60% of the loanable amount.
While qualifying for ACH or MCA loans is easy, high lender fees and interest can lead to dire financial straits that may even put you out of business.
Medical receivables factoring is generally safer for your finances because your customers will eventually pay their invoices, thus paying your cash advance. Because repayment is almost guaranteed, you can focus more on growing your business than scrambling to repay debts.
Medical Receivables Factoring vs Quick Pay Discounts
Offering customers discounts for prompt repayment can accelerate cash flow when you need it. However, there is an important limitation to quick pay discounts.
Some customers will prioritize their own cash flow over your discounts, so they may not take your offer and decide to make payments as scheduled, leaving you low on cash and unable to grow your business.
Factoring for medical companies is more reliable because you are guaranteed a cash advance as long as your invoices are approved.
Typical Medical Provider Factoring Rates And Fees
Invoice factoring fees depend on how much you plan to factor and how long customers take to pay. Factoring more amounts and getting customers to pay faster will generally result in lower factoring rates. Factoring companies may also consider other criteria like your business tenure, customer base diversity, and overall customer credit quality.
We charge two types of fees when you factor an invoice:
- Initial fee: This fee covers the factoring company’s invoice processing expenses for a set initial duration (typically the first 30 days). Your initial fee usually ranges between 0.90% and 3.50% of the invoice’s face value.
- Incremental fees: These fees kick in after the initial fee period is up and compensate the factoring company for its time. Incremental fees typically range between 0.25% and 1.50% of the invoice’s face value.
Requirements To Apply For Medical Receivables Factoring
You need to apply for medical receivable factoring with altLINE to be eligible for cash advances. Here are the documents you need:
List Of Existing And Potential Customers
To qualify for invoice factoring, you need a list of existing and potential customers. Factoring companies need this list to review the credit quality of your customer base and decide your eligibility for invoice factoring.
Medical Factoring Application
You need to submit a form when applying for medical receivables factoring. Enclose these documents alongside your application:
- Business ownership identification
- Personal identification
- Employer Identification Number
- Relevant corporate paperwork
Accounts Receivable Aging Report
Accounts receivable aging reports list all your outstanding invoices, categorized by their due dates. We need this report to research your customers’ payment behaviors and determine their factoring eligibility. We will consider invoices that are 30 to 90 days outstanding, but invoices for customers who say they cannot pay may not be eligible for factoring.
Frequently Asked Questions About Our Factoring Services
Here are some common questions about factoring your medical receivables answered:
Do you need to run a credit check before getting started?
altLINE runs a credit and background check on all medical company owners. However, there are no minimum credit thresholds for approval. Background checks are reviewed for financial-related crimes or felonies. In the event a borrower has a spotty background, approval with altLINE may be in question, but in the event the borrower is disqualified, altLINE will often work with the borrower to identify a medical factor that is willing to help.
Do you require UCC filings when factoring medical receivable invoices?
Upon executing a term sheet, altLINE will file a UCC on the client’s business. This UCC filing allows altLINE to properly secure the collateral (i.e. the invoices) it plans to advance against when the factoring facility is in place. UCC filings are an integral part of any form of lending.
Is medical receivable factoring a debt or loan?
Medical receivable factoring is neither debt nor a loan. Invoice factoring is the sale of your invoices to a third party. The money advanced against these invoices will be repaid by your customers.
However, altLINE is a recourse factor, so you may need to pay the cash advance back if your customer fails to pay their invoice.
Do you offer non-recourse medical receivable factoring?
altLINE only offers recourse medical receivable factoring. While you must repay the cash advance if your customer fails to pay, recourse factoring structures often allow for factors to extend lower rates and larger credit limits on your shippers.
Jim is the General Manager of altLINE by The Southern Bank. altLINE partners with lenders nationwide to provide invoice factoring and accounts receivable financing to their small and medium-sized business customers. altLINE is a direct bank lender and a division of The Southern Bank Company, a community bank originally founded in 1936.