Factoring Blog

How to Finance a Durable Medical Equipment (DME) Company with Medical Factoring

Medical services has been one of the areas of the economy that remained positive during this recession.  Most medical service and durable medical equipment companies have weathered the recession much better than other companies. Obviously, people become ill regardless of economic conditions, so the industry has some immunity from economic downturns. However, this does not mean that they have not had any financial problems.

The cash flow dilemma

Healthcare companies, such as DME’s and medical supply companies, are usually dependent on insurance, medicare and medicaid payments. However, insurance companies are notorious for paying slowly – very slowly. It’s not unusual for a claim to take 60, 90 or even 120 days to pay. This creates a problem for the DME because they have to handle all their expenses while waiting for payment. This can be very difficult for young companies that are not well capitalized.

A healthcare industry solution

One way to solve this problem is to use medical receivables factoring, a special form of  financing that is available to companies in the healthcare industry. It solves the cash flow problem by providing an advance against your Medicare/Medicaid (or other insurance) claims. This accelerates your revenues and provides the funds you need to pay suppliers and employees. The transaction is settled with the factoring company once the claim is paid.

Easy to get. Quick to deploy

One  important advantage of factoring over other alternatives, such as medical business loans,  is that it’s relatively easy to obtain. Especially if you are working with Medicare or with reputable insurance companies. The biggest requirements are that your company have well established billing procedures, work with good payers and be free of liens and legal problems.

More receivables funding lines can be initially deployed in a couple of weeks, after the due diligence is complete. After that, funding occurs on a recurring basis. This is a solution that can help DMEs and medical supply companies that have cash flow issues and needs funding quickly to follow new opportunities.

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