How to Finance a Quick Growing Medical Office

Medical Factoring

Most doctors would consider that a quick growing medical office or clinic is a good thing. The reality is that a quick growing business is only good if you have the resources to manage and sustain growth. If you don't have the financial resources to sustain growth, it can actually become a serious problem. Most of the times, this can create cash flow problems leaving unpaid supplier bills and missed payroll. If done incorrectly, growing too quickly could drive you out of business.

MOst financial problems from growth happen because expenses usually have to be paid quickly, while the associated revenue flows in slowly. Most insurance companies, HMO's, PPOs and Medicare/Medicaid can take up to 60 or even 120 days to pay a claim. This leaves you with quick expenses, but slow income. Obviously, if you have a cash reserve, you can absorb these expenses while waiting for the revenues to arrive. If you don't have a reserve, you can run into serious problems.

No cash reserve? Consider an alternative

The problem with cash reserves is that they are really difficult to build. Most doctors prefer to invest their money in growing their medical offices. Many medical offices view reserves as wasted resources since the funds are just sitting there in a bank account waiting to be used. But without them, your growth plans can quickly become derailed.

If you do not have a cash reserve, the best alternative is to use business financing to cover company expenses while waiting for payments. Actually, using business financing to help medical office growth is a common strategy. Most doctors have an advantage here, since they can easily qualify for business loans due to their profession. While business loans can be used to fund growth, they have some limitations since they are best suited to purchase capital goods. For many fast growing medical offices, a better option is to use medical accounts receivables financing.

Growth by financing medical insurance claims

The challenge is simple, you need to get paid sooner but insurance companies will pay on their own set schedules. Medical factoring solves this problem by financing your slow paying insurance clients. You get immediate access to working capital, which can be used to pay office expenses. It's almost as if your patients paid with cash or credit card. This allows you to grow and take on more patients without risking cash flow problems. You cash flow is in your control because you can always finance claims if you need to.

And as opposed to a business loan, medical receivables financing does not have a fixed limit. The size of the line is determine by the amount, diversity and credit quality of the insurance claims you finance.

Can it work for me?

Financing your medical accounts receivable can help your fast growing medical office if:

  1. You have cash flow problems - and -
  2. The problems come from slow paying insurance claims - and -
  3. You need the money to cover operating expenses

This program only works if your problem is that insurance companies are paying slowly. If they are not paying at all and are collection problems, this program won't help you.

Does my medical office qualify?

The qualification requirements of this program are relatively simple. The most important one is that you must work with credit worthy insurance companies who have a good track record of payments. While they can pay slowly, it's important that they have a solid history of paying. Additionally, your medical office should not have any liens encumbering its accounts receivable and you should not have any major legal or taxation problems.

Application process and due diligence

To get the service, you will need to submit an application package, along with financial information about your medical office. This will enable the factoring company to review your profile and determine if they can offer a solution that will benefit you. During the application process, your billing procedures will be reviewed to ensure that they are compatible with this type of financing. On average, setting up a line takes a couple of weeks.

To increase your chances of success, be sure to submit a legible application, include all the requested information and add a one page executive summary of your medical office. Submitting a well presented and documented application is one of the best strategies to negotiate the best factoring rates.

Get a medical factoring quote. Questions? Call (866) 730 1922.

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