Many medical practices are turning to medical factoring as a means of alternative financing, so as to close gaps in cash flow and avoid having to wait for insurance carriers to reimburse them for services. Here are some things you should know about medical factoring if you are considering starting up the practice for your own medical firm.
What Medical Factoring Is
Unlike taking out loans, there is no money which is borrowed in medical factoring, and instead the invoices generated by a medical practice are purchased by a factoring company. In exchange for the invoices, the medical practice would receive upfront cash so they don’t have to wait for reimbursements to be made by insurance carriers.
Advantages of Medical Factoring
Most medical practices are obliged to be concerned about their cash flow, since reimbursements can be slow coming from insurance providers. Taking out business loans is not a very good solution for medical firms, because they generally take too long to be approved, and that will not solve the need for cash to conduct daily operations. In most cases, cash can be provided to your medical firm in just a few days, as opposed to the months it might take for a bank loan approval.
How the Process Works
It will generally take between one and five business days for a due diligence process to be conducted, as well as an audit of the billing practices for a medical firm. Then an agreement will be reached between the medical provider and the factoring company. Following this, copies of the insurance claims or invoices will be submitted to the factoring company, and the factor will then issue a cash advance to the medical service provider. Then the factor will collect the insurance claim or the invoice in accordance with the agreement, and as a last step, will remit the remainder of the invoice amount to the medical service provider, after subtracting their factoring fee.
Would Factoring Benefit Your Medical Practice?
Factoring is a business transaction that can put cash in your hands immediately, so you don’t have to wait for insurance reimbursements. Contact us at POM Capital & Finding Services if you’d like to learn more about medical factoring.