What is a Medical Invoice Factoring And Medical Receivable Financing?
Medical Invoice Factoring and Medical Receivable Financing are both invoice financing products funded by banks and non-bank lenders that allow companies in the Medical Industry to turn their invoices or accounts receivables (i.e. payments from either Medicaid/Medicare, HMOs, Private Insurances, personal injury lien settlements, or worker’s compensation insurances, etc.) into immediate capital. ]
Medical Invoice payment terms can range anywhere from net 15 to up to net 90 business days. Businesses in the Medical Industry have to find ways to juggle the cash flow within the business while waiting to await potentially lengthy payment cycles.
Our team is committed to helping your business grow with Medical Invoice Factoring and Medical Receivable Financing and will guide you through the loan process each step of the way.
What companies could use Medical Invoice Factoring or Financing?
- Medical offices
- Imaging centers
- Hospitals
- Nursing providers
- Surgery facilities
- Diagnostic centers
- Medical staffing companies
- Home healthcare agencies
- Durable medical equipment providers
- Nursing homes
- Pharmacies
- Hospices
- Medical supply companies
What is Medical Invoice Factoring?
Medical Invoice Factoring is an Invoice Financing tool that is provided by a lender, which allows a Healthcare Provider to sell their Medical Invoices for up to 90% of the Invoice’s face value. The lender would follow up with the insurance client to collect the payment of the Invoice.
In exchange for factoring their invoices, companies in the medical industry can receive the highest advance rate against the face value of their invoices. This capital could then be redirected into other areas of the business whether to help cover expenses or to grow and expand.
Medical Invoice Factoring is an Invoice Financing product funded by a lender that allows a Health Care Provider working within the Medical Industry, the ability to sell their invoices for up to 90% of their invoices full value.
This product can really benefit companies hoping to maintain a healthy cash flow considering Medical Insurance Invoice Receivables (i.e. Medicaid, Medicare, or private insurance company payments) typically pay anywhere from net 15 to up to net 90 business days or more.
Once a Healthcare provider submits their Medical insurance invoices for the services performed. The lender factoring the invoices then purchases the healthCare provider’s receivables for up to 90% of the full face value of the invoice.
Then the funds are quickly deposited directly into the HealthCare provider’s business checking account within 24-48 hours. The lender providing the Medical Invoice Factoring keeps the remaining 10% reserve of the invoice as a buffer until the full invoice value is paid by the insurance company.
This works just in case some of the HealthCare provider’s bills are not paid for some reason or if they were billed incorrectly. Once the insurance company makes the full invoice payment in net 15 to up to net 90 business days or sometimes more.
The min of the 10% reserve, is released back to the HealthCare provider minus the factoring fee cost of capital. Medical Invoice Factoring can be a great way for HealthCare providers to bridge their potential cash flow gaps that are oftentimes created due to the slow payments from both Private and Government insurance carriers.
Medical Invoice Factoring can help a HealthCare provider’s cash flow by freeing up the liquidity locked within their receivables for anywhere from net 15 to up to net 90 business days or more.
This product aids HealthCare provider’s within the Medical Industry with accessing working capital they need without having to take on debt in the form of a loan or giving up equity.
Medical Invoice Factoring allows HealthCare providers the ability to better bridge the gap between their invoices and collections. By providing them with cash within days of generating Medical Invoice Receivables.
This product can give growing HealthCare Providers within the Medical Industry the confidence to fulfill larger contracts knowing they have a method to free up liquidity.
Medical Invoice Factoring grows as the HealthCare Providers business grows. The more receivables they generate the more immediate capital they can receive by utilizing this Invoice Financing product.
This product can work great for both newer and established HealthCare Providers.
With newer practices that do not have the financial history that traditional banks demand therefore they do not typically qualify for a lot or all of a traditional bank’s programs.
Medical Invoice Factoring hinges on more the full creditworthiness of the medical insurance client paying the invoice vs the practice that is owed the invoice. Thus this program can work with newer HealthCare providers looking to establish their businesses.
On the flip side, this product can also help a successful HealthCare provider that wants to use the product to free up cash flow in order to grow and expand operations quickly.
The company must be a U.S Based Licensed HealthCare provider operating within the Medical Industry in good standings.
The company must be billing Medical Insurance providers, (i.e. Medicaid/Medicare, HMOs, private insurances, personal injury lien settlements, or worker’s compensation insurances, etc)
The HealthCare Company needs to follow all proper medical billing procedures and guidelines.
Healthcare Providers within the Medical Industry should have an average monthly billings of third-party Medical Insurance Invoice Receivables ranging from a minimum of $35,000 to $500,000.
The company must be free of liens and judgments and they can not have severe tax problems.
What is Medical Receivable Financing?
Medical Receivable Financing is an asset-based lending financing tool that is provided by a lender, which allows a Large Scale of Healthcare Providers to pledge their Medical Invoices for an advance of up to 85% of the invoice’s face value
The product works pretty similarly to Medical Invoice Factoring. The main difference is that the Medical Industry company would only borrow an advance against their Insurance Receivables instead of selling their receivables to a lender to factor.
The product works as a loan that is secured by the Health Care business with the Medical Insurance Receivables as of the main collateral. Since the lender is only advancing against the invoice the Health Care provider is still going to be able to manage the payment collections relationship with their insurer clients.
Since the lender does NOT own the receivables as they do with factoring, the lender will require that the Health Care provider borrower convert all of their insurance payments from being paid directly to the company into a mutual account. This is where insurance payments for all pleaded receivables can be monitored.
Basically a lockbox of sorts whereby funds can be advanced from to the customer and payments can be received from the insurance’s clients. Allowing for larger-scale Health Care Providers the ability to be able to not only maintain their collections relationships but also free up to 85% of the value trapped within the lengthy Medical Receivables Invoices. The companies could then apply that excess capital towards either operating or expanding their businesses.
Medical Receivable Financing is an Invoice Financing product that is funded by lenders to Large Scale Healthcare Providers within the Medical Industry. That has a minimum of $500,000 per month in Medical Invoice Receivables. Unlike Medical Invoice Factoring, this product does not purchase the companies invoices.
Instead, it grants a healthcare provider an Asset Based Credit Line for up to 80% of the HealthCare providers owed invoices. Considering the fact that most Medical Invoice Receivables are typically paid anywhere from net 15 to up to net 90 business days or more. This product could help to ease the cumbersome and confusing billing processing that is clearly slow and can cause the accounts payable process to strangle the business’s cash-flow.
With Medical Receivables Financing the asset-based credit line is collateralized by the net realized value of the company Invoices. Two types of Medical Invoice Receivables are considered for this business financing product, healthcare receivables payable by insurance companies and government agencies like (i.e., commercial insurance companies, HMOs, Blue Cross-Blue Shield, Medicare, and Medicaid) and Commercial Accounts Receivables owed by buyers like hospitals for daily use items or services.
Large Scale Healthcare Providers that meet the criteria for this product can unlock the liquidity trapped within their invoices all while maintaining their collections relationship with their clients. Instead of selling their medical invoice receivables to a lender to factor.
A Larger Scale HealthCare provider would simply have to redirect their Medical Invoice Receivables away from paying the invoices directly to the company and instruct the clients to pay into a neutral lockbox account that both the lender and the HealthCare provider can have access to. The lockbox account usually is created at the bank where the HealthCare provider is already doing business.
Once a “lockbox” or a “blocked account” is established by the lender for the receipt of collections of the accounts receivable. Again this is when the company’s customers are instructed to pay their accounts by directing all payments to the lockbox. A typical agreement gives the asset-based lender control of the company’s incoming Medical Invoice Receivable Payments from customers.
These payments are deposited in the exclusive account set up by the lender for the Medical Provider. The lender credits these funds against the number of invoice receivables that are coming into the lockbox. The lender then makes new advances against the “revolver” as requested as additional invoices are submitted month over month.
This product is sometimes known as a ledger line of credit or invoice financing, it is a great solution for HealthCare providers that need more funding that is not available from traditional lenders. Many Medical Industry companies need additional cash flow to support seasonal demands, growth, business opportunities or solve a short-term cash need. With this Invoice
Financing products, companies can access capital without having to take on debt via an unsecured loan and it is less restrictive and expensive than equity financing. The company’s asset-based line of credit can increase or decrease based on the amount of monthly medical invoice receivables. All while allowing the company to maintain it’s collections relationship with its clients.
Medical Receivable Financing can help provide HealthCare providers with predictable cash flow, that can be used to either juggle everyday expenses or expand the business for the future. This product can really help to give companies the freedom to focus on running their business better.
If a HealthCare provider’s medical invoice receivable volume is at or above $500,000 net realized value per month, those accounts receivable may be used as collateral to obtain working capital in a matter of days rather than weeks.
With Medical Receivable Financing HealthCare providers are able to free up the capital trapped in their invoices and maintain the relationship of the collection with their clients.
This product gives HealthCare providers the freedom to operate their business within the Medical Industry and use the capital for expansion, payroll, equipment financing, or day-to-day operations.
Medical receivables financing offers your business the ability to streamline your cash flow by collecting on your receivables in days, not months sometimes all the way up to net 90 business days or more.
This product does not hinge completely on the HealthCare provider’s credit rating as if they were seeking out a term loan or something. Here it is all about the creditworthiness of the Insurance provider client’s credit profile that determines the level of risk to the funding source.
Medical Receivable Financing can provide HealthCare related companies with flexible and immediate cash that will give your business the opportunity to grow, restructure, take advantage of supplier discounts, hire additional employees, or even to fund payroll.
Medical Receivable Financing works best for Larger Scale Established HealthCare providers with a minimum of $500,000 per month is Medical Invoice Receivables.
Therefore most lenders will want a HealthCare provider to supply the following documents when applying.
6-12 Most Months of Business Bank Statements
Lenders will want to review “financial statements.” Asset-based lending institutions will be diligent and base their funding decision on a good balance sheet, proof of profitability, and reviews mentioned above. Funding decisions are not based solely on a balance sheet. However, so long as the HealthCare provider can supply proof of profitability. Therefore, the following documents may also be required to have on hand when applying for Medical Receivable Financing:
2 Most recent years of Business Financials: Including Profit & Loss and Balance Sheet
2 Most Recent Years of Business Tax Returns
Copy of Most Recent 941 Filing
Full Aged AR Reports with Detailed Payer Information by Insurance Provider and Accounts Payable Aging Summary
The owner (s) Personal Financial Statement, Company Debt Schedule and Proof of Ownership
Medical Receivable Financing lenders will base their decisions on several factors including the net realized value (NRV) of the receivables. Typically, the Lender will add financial covenants and guaranties and will do a more thorough analysis of the provider’s financial condition.
Generally, with this product lenders will want to determine the quality of the Medical Invoice Receivables that are going to be considered for the “funding base,” also known as the borrowing base. Ineligible items such as private copay receivables, contractual reserves, and receivables past 180 days will not be considered and will be excluded from the funding base. This evaluation will also determine the advance rate.
Then next the lender will want to conduct a third-party payer analysis and compliance review. Since the lender is going to collateralize on the receivables, this review will identify clinical liability issues that expose the client and the finance company regarding the receivables basically an analysis of existing surveys and frequency of payment for each payer class will be evaluated (Collateral).
Validate and verify that the proper and current licensing is all set and in place.
Available Capital Limit
Up to $20M per Invoice
Standard Interest Rates or Cost
Rates Start at 1.5% for every 30 days per Invoice
Typical Underwriting TimeLine
3-10 Business days
Average Term Limits
12 to 24 Months
In closing, Whether for preventive routine visits or major life-saving surgery. The Medical and Healthcare Industry is literally the heart of this country. The HealthCare providers that service the Medical Industry typically have to wait for payment on invoice terms that range from as quick as net 15 business days to as far out as net 90 business days.
We here at Troy Business Groupare a Full-Service Business Financing firm that specializes in both Medical Invoice Factoring and Medical Receivables Financing. We understand the unique challenges of the Healthcare Industry and can provide the financial support your company needs to help manage growth, take advantage of opportunities, or help fund payroll.
Troy Business Grouphas a team of seasoned Business Financing Consultants that specialize in providing clients with access to both Medical Invoice Factoring and Medical Receivable Financing. Please apply online, email us for an appointment, or call us today.
Our team is committed to helping your business grow with Medical Invoice Factoring and Medical Receivable Financing and will guide you through the loan process each step of the way.