How Factoring Can Help Fund a Hospital

Funding a hospital is no easy feat, particularly when the cost of supplies and equipment can quickly outpace the amount of cash from outstanding invoices. For this reason, medical factoring is a tool that many facilities use to improve cash flow while waiting for insurance companies and individual patients to pay on accounts.

What Is Factoring?

Simply put, you are using your accounts receivables as collateral for a cash advance by factoring your invoices. This process can involve all of your invoices or part of them, can be a long-term contract or a one-time advance and have many other variations depending on the factoring company and the contract you sign.

How Can It Ease Cash Flow?

By securing the cash today that you will be paid by the insurance company or the patient in the future, medical factoring can help ease cash flow in a very cash-strapped industry. You can have a dependable flow of cash from the factoring company to pay your bills on time while still giving insurance companies and patients the appropriate time to pay.

What About Due Diligence?

The factoring company must do due diligence on the invoices you factor, including sending an inspector to review your facility, procedures and billing processes. This is usually for longer-term partnerships, including taking a significant portion of the billing processes off your shoulders.

What Is an Over-Advance?

Most factoring will give a standard advance rate of up to eighty percent of the invoice total. This can be too little to be helpful to many medical companies, which have much higher cash flows than retail or manufacturing businesses. For this reason, factoring companies catering to medical facilities often offer over-advances or an advance over the amount they would typically give.

How Do Hospitals Qualify?

Your facility can qualify for this type of financing despite financial problems such as bankruptcy, tax problems or losses because your clients’ credit history is more important than the facility’s credit score. To qualify, you will want to choose a factoring company with experience in the medical industry and gather the necessary paperwork for online applications.

Medical factoring can be used to ease cash flow problems in facilities dependent on the timely payment of invoices that have to go through insurance companies first. Since medical invoices can take a long time to be paid, an advance secured by those accounts can be the easiest way for hospitals to pay the bills.