According to the U.S National Library of Medicine and the National Institutes of Health Medline dictionary the word “stat is an adverb for the latin word: STATIM. Statim is an adverb that means immediately or without delay. When a persons arrives at the hospital emergency room with a gunshot wound, the staff might say, “We need to get this patient to surgery stat!” meaning immediately, now. In a medical situation “stat” connotes extreme urgency. Does your medical business need to accelerate cash flow with accounts receivable financing “stat”?

One of the greatest challenges for medical professionals is managing their accounts receivable. Medical accounts receivable typically are the largest asset on their balance sheet. It typically takes 60 to 120 days or more to collect medical accounts receivable because of the long reimbursement process from third party payors, such as Medicare, Medicaid, and commercial insurance companies. The collection process is long and complex. Disputes regarding payment amounts are common. Medical accounts receivable financing accelerates cash flow to pay for expenses such as payroll, malpractice insurance, rent, inventory and advertising.

What are the types of medical professionals that may qualify for medical accounts receivable financing? The following is a partial list: hospitals, medical centers, rehabilitation centers, medical laboratories, surgical centers, sports medicine centers, MRI imaging centers, physical therapy centers, substance abuse clinics, physical therapy centers, manufacturers and/or distributors of medical devices, and physician’s practices whether general or specialized from A to Z such as anesthesiologists, gastroenterologists, obstetricians, and Zygote – Morula Specialists.

How lengthy is the process to obtain medical accounts receivable? It generally takes four to eight weeks to obtain funding because of the unique issues presented. The commercial finance company must perform extensive audits and analysis of the prospective client’s financial situation. They need to determine that the business is and will be a “going concern”. They need to examine billing practices which often are outsourced. This may require a separate audit of a third party. And they need to examine the forseeability of collection of the outstanding accounts receivable by auditing the accounts receivable aging reports from a historical collection perspective. In other words, how much of the amounts owed will be collection losses? How much will actually be collected?

What are other unique issues regarding medical accounts receivable financing? There are potential bankruptcy issues, lien priority issues and the “big bad wolf” issue: after a commercial finance company has purchased medical accounts receivable, the federal government can assert lien priority on the assets of a bankrupt medical company. One example of this is the case of American Investment Financial (“AFI”) versus the US also known as the internal revenue service.

AFI loaned over $800,000 to a pediatric and urgent care clinic. The clinic defaulted on their financial obligations to AFI and also defaulted on their tax obligations to the federal government. It was undisputed that AFI had followed the rules correctly in terms of filing their liens and perfecting their security interests. Nevertheless, the court held that pursuant to Federal law, after a 45 day statutory safe harbor period had passed, the government’s lien took priority. AFI lost hundreds of thousands of dollars because of federal tax law and IRS regulations. It is no wonder that commercial finance companies look very carefully before they purchase medical accounts receivable.

Commercial finance companies will generally advance an amount equal to 70% to 80% of a borrowing base, which may be called “the aggregate amount of eligible accounts”, “net realized value” or “net expected collections”. You can expect the following items to be excluded from your borrowing base: accounts which are subject to dispute, counterclaim or setoff; accounts of any account debtor who has filed or has filed against it a petition in bankruptcy; accounts owed directly by patients or customers.

The bottom line: medical accounts receivable financing, or medical factoring, is more difficult to obtain than other types of factoring because of the legal risks and business risks faced by the lenders. The process to obtain medical accounts financing usually takes much longer than accounts receivable financing for other industries, such as a manufacturer. This good news is, once the credit facility is established, funding can take place in a day or less from your request for financing. You can have medical accounts receivable financing “stat”!

Copyright © Gregg Financial Services

www.greggfinancialservices.com

Thomas McCarthy By:


As a small business owner, you will encounter the need for capital at various points in your business development. Understanding financial options available is a crucial business step to take, as the primary cause for small business failure is under capitalization. While you may not be having a cash crisis, you may simply be seeking the money to expand your business. If you are unable to turn to traditional financing, accounts receivable financing may be a sound option for you to consider.

What is Accounts Receivable Financing?

In its simplest terms, accounts receivable factoring is the selling of your outstanding receivables at a discount to a factoring company. Accounts receivable financing is also known as accounts receivable factoring or accounts receivable funding. In this transaction, the factoring company pays you a percentage of the accounts receivable up front, typically 75-80% of the total, with the remainder to be paid once the invoice has been paid. The factoring company will charge you a nominal fee for the transaction, but will handle the collections of your accounts receivables that you have sold to them. The fee that you will be charged will be based upon the factoring company that you select, the amount of the invoices that you sell and the duration of time that it takes for the invoice to be paid. Typically, the shorter the time it takes to have the invoice paid, the smaller the factoring fee. So, for companies that have clients who quickly pay their invoices, the fee could be as small as 1%.

The process of accounts receivable financing is quite simple. Your business will sell your accounts receivable, either all or a portion, to a factoring company in return for a discounted rate. The factoring company will generally wire you the funds the same day or the next day once they have received their proper paperwork, and then they will handle the collections of the invoices. Once the invoices have been paid, the remainder of the invoice, minus any applicable fees will be paid to your company directly. Most factoring companies will provide you with a consolidated monthly statement so that you can review the transactions and for your company’s record keeping.

Benefits of Accounts Receivable Financing

Pass off Collections: Outsourcing your accounts receivable management to another company can free up your previously dedicated accounts receivable resources to focus on other more productive activities such as selling. Once you sell your accounts receivables, the factoring company manages collection of the payment.

Free up Working Capital: Most small businesses have a need for additional working capital, yet have their assets tied up and are unable to qualify for additional financing. Accounts receivable factoring can provide your company with cash as quick as the same day for invoices submitted. This cash can then be used for your customary business expenses, to meet payroll or for business expansion needs.

Quick Financing: Accounts receivable factoring will not require a business plan, long applications, credit checks, tax statements or other financial information. Accounts receivable factoring is not considered to be a loan, so there is much less qualification work involved to establish a relationship with a factoring company. Also, the approval process can generally only take a few days instead of a few weeks when compared to traditional financing.

Assistance with Slow Paying Customers: One of the challenges that many small businesses face when trying to grow is that many of the larger customers that they are looking to partner with have slow paying accounts receivable policies. For example, many larger retailers have a standard payment policy of 90-120 days. If it requires a substantial amount of capital to fulfill their product orders, your small business could be placed in a cash crunch simply by accepting a great new, large retail customer. Accounts receivable factoring allows you to sell this invoice for a discount in order to capture the capital that you had to spend in order to fulfill the order.

Selecting Factoring: Many factoring companies will allow you to pick and choose which invoices you send to them to factor. This can mean a substantial cost savings to your business and will allow you to factor only the larger invoices, or the ones that you know in advance are going to be paid in the mid term, giving you the cash that you need and helping to justify the fees associated with factoring.

Once you are ready to consider factoring as an option for your accounts receivable, ask the following questions of the companies that you are interviewing:

* Is the money needed necessary for your company’s survival? Or, are you looking to take advantage of a business opportunity?

* How does this financing strategy match with your business plan? If you so not already have an established business plan in place, put one together prior to seeking factoring financing. Having a solid business plan will help you to make choices for your business that are in alignment with all of your business purposes and goals.

* Is your business in need of expansion capital? Have you explored other more traditional methods of financing?

* Have you reviewed the real cost of factoring your accounts receivable? For example, what percentage of your current repeating customers pay on time, how many pay late and do you traditionally have any issues with customers who don’t pay?

* Have you researched multiple factoring companies to determine their rates and services before selecting one?

Getting financing can often mean the difference between a company closing its doors and staying open.

While it can do more than just prevent bankruptcy, many business owners are not aware of the process or its benefits. Spend the necessary time to investigate the companies you are working with, inspect the contracts prior to signing, and work to negotiate discounted rates for your business.

Gregg Elberg By:


According to the U.S National Library of Medicine and the National Institutes of Health Medline dictionary the word “stat is an adverb for the latin word: STATIM. Statim is an adverb that means immediately or without delay. When a persons arrives at the hospital emergency room with a gunshot wound, the staff might say, “We need to get this patient to surgery stat!” meaning immediately, now. In a medical situation “stat” connotes extreme urgency. Does your medical business need to accelerate cash flow with accounts receivable financing “stat”?

One of the greatest challenges for medical professionals is managing their accounts receivable. Medical accounts receivable typically are the largest asset on their balance sheet. It typically takes 60 to 120 days or more to collect medical accounts receivable because of the long reimbursement process from third party payors, such as Medicare, Medicaid, and commercial insurance companies. The collection process is long and complex. Disputes regarding payment amounts are common. Medical accounts receivable financing accelerates cash flow to pay for expenses such as payroll, malpractice insurance, rent, inventory and advertising.

What are the types of medical professionals that may qualify for medical accounts receivable financing? The following is a partial list: hospitals, medical centers, rehabilitation centers, medical laboratories, surgical centers, sports medicine centers, MRI imaging centers, physical therapy centers, substance abuse clinics, physical therapy centers, manufacturers and/or distributors of medical devices, and physician’s practices whether general or specialized from A to Z such as anesthesiologists, gastroenterologists, obstetricians, and Zygote – Morula Specialists.

How lengthy is the process to obtain medical accounts receivable? It generally takes four to eight weeks to obtain funding because of the unique issues presented. The commercial finance company must perform extensive audits and analysis of the prospective client’s financial situation. They need to determine that the business is and will be a “going concern”. They need to examine billing practices which often are outsourced. This may require a separate audit of a third party. And they need to examine the forseeability of collection of the outstanding accounts receivable by auditing the accounts receivable aging reports from a historical collection perspective. In other words, how much of the amounts owed will be collection losses? How much will actually be collected?

What are other unique issues regarding medical accounts receivable financing? There are potential bankruptcy issues, lien priority issues and the “big bad wolf” issue: after a commercial finance company has purchased medical accounts receivable, the federal government can assert lien priority on the assets of a bankrupt medical company. One example of this is the case of American Investment Financial (“AFI”) versus the US also known as the internal revenue service.

AFI loaned over $800,000 to a pediatric and urgent care clinic. The clinic defaulted on their financial obligations to AFI and also defaulted on their tax obligations to the federal government. It was undisputed that AFI had followed the rules correctly in terms of filing their liens and perfecting their security interests. Nevertheless, the court held that pursuant to Federal law, after a 45 day statutory safe harbor period had passed, the government’s lien took priority. AFI lost hundreds of thousands of dollars because of federal tax law and IRS regulations. It is no wonder that commercial finance companies look very carefully before they purchase medical accounts receivable.

Commercial finance companies will generally advance an amount equal to 70% to 80% of a borrowing base, which may be called “the aggregate amount of eligible accounts”, “net realized value” or “net expected collections”. You can expect the following items to be excluded from your borrowing base: accounts which are subject to dispute, counterclaim or setoff; accounts of any account debtor who has filed or has filed against it a petition in bankruptcy; accounts owed directly by patients or customers.

The bottom line: medical accounts receivable financing, or medical factoring, is more difficult to obtain than other types of factoring because of the legal risks and business risks faced by the lenders. The process to obtain medical accounts financing usually takes much longer than accounts receivable financing for other industries, such as a manufacturer. This good news is, once the credit facility is established, funding can take place in a day or less from your request for financing. You can have medical accounts receivable financing “stat”!

Copyright © Gregg Financial Services

www.greggfinancialservices.com