A lot of questions can come up when a business owner starts researching medical billing funding solutions – the idea of selling their invoices to a factor or medical billing funding agency. This article addresses some of the more frequently asked questions:
What differentiates a factoring company from a bank?
First and foremost, since factoring is not a loan, there is no debt on your company’s balance sheet. Moreover, factoring firms have the ability to make a quick decision regarding your medical billing funding options, while banks may take weeks-even months-to approve a loan.
Furthermore, factors determine lines of credit based on the creditworthiness of your customers, while banks focus on your company’s financial history and cash flow. In other words, a funding agency looks to your company’s future while banks place emphasis on your company’s past.
How long does it take to be approved for factoring funding solutions?
In general, a funding agency will begin its due diligence process after receipt of a signed contract. This process can last anywhere between 1-5 business days, and money is moved at its conclusion. Thereafter, a company can receive funds in as little as 24 hours within verification. See our factoring process and learn our medical billing funding options can benefit your business.
What information does a business owner need to provide to a factor in order to begin the process of coming up with funding options?
Required paperwork varies among factors, however, there are a handful of documents that most all will expect. Most likely, the owner of a medical company will be asked to provide a copy of your company’s most recent accounts receivable and accounts payable aging reports, Articles of Incorporation or Organization filing, copy of owner’s driver’s license, voided copy of a check, a master customer list, a sample contract, and of course, invoices to factor.
What happens if my customers don’t pay an invoice?
This depends on whether your company entered into a non-recourse or recourse agreement with the factor. Within a non-recourse agreement, the funder assumes the credit-related loss. However, most medical billing solutions (factors) do not assume the risk of non-payment due to disputes regarding quality or timeliness of your company’s medical billing services. On the other hand, if you have a recourse agreement, your company will have to reimburse the factor for any unpaid invoices. This is usually accomplished by having the past due invoice deducted from the next advance or replacing it with another factored invoice.
Can a medical billing service qualify for funding if it’s a new business or has past credit problems (i.e. bankruptcy, IRS liens, and judgments)?
Yes. A reputable medical billing factoring company will still consider your application if you have credit problems or a recent bankruptcy because the credit decision is based primarily on the creditworthiness of your customers. However, tax problems are handled on a case-by-case basis, so be sure to let you funder know if you have any IRS issues.
Philip Cohen is the founder and president of PRN Funding, LLC, which is a focused player in the medical invoice funding marketplace. Through a process known as factoring, PRN Funding provides medical business owners with the financial resources needed to grow and effectively compete in the industry. With no minimums or fixed terms, PRN Funding (http://www.prnfunding.com) provides medical companies with flexible and immediate access to capital.
Article reprinted with permission by PRN Funding, LLC.
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