Unfortunately for consumers, that creativity often translates into price hikes, additional fees, reduced services or cut backs on productivity. But does it have to be that way?

Take a look at the airline industry. When fuel prices soared last summer, airline giants started charging extra for what were once common courtesy services in addition to the original ticket price. They started with charging for snacks and drinks and then quickly moved onto charging checked bag fees, assigned seat fees, fuel surcharges, curbside check-in fees, etc.

Once the industry giants established that this additional fee policy was going to be part of the standard flight-booking procedures, it didn’t take long for all of the airlines to jump on the “Hidden Fee Bandwagon.” From a customer’s perspective, it seemed as though the airline industry as a whole started seeing dollar signs instead of thinking about its customers needs. Then along came Southwest Airlines with its clear thinking and its “No Fee Policy.”

In some ways, the accounts receivable factoring industry can appear to be a lot like the airlines industry. Both operate world-wide, both industries should be service-oriented, and both industries are notorious for tacking on extra fees in addition to the basic fee. Much like Southwest Airlines, the factoring industry has a handful of healthcare factoring companies who do not charge extra fees in addition to the base fee. This article will discuss three areas where factoring firms might insert hidden fees.

First and foremost, a business owner needs to understand the basics of how a factor charges for its factoring services. It’s important to note that healthcare factoring firms do not loan money; rather, they purchase a company’s invoices at a discounted rate. This discount rate can be a one-time flat fee, or it can vary depending on how long the factor owns the invoice.

In general, discount rates can be affected by a number of things, including the contractual commitment, the average monthly purchase volumes, the average size of the invoices sold, the number of account debtors (customers) that will be factored and the credit quality of those debtors. Variations in each of these will lead to potentially substantial changes in the fee structure. In many cases, factoring firms will have extra fees in addition to their factoring discount fee. More often than not, these “hidden fees” are disguised as set-up fees, administrative fees and penalty fees.

Set-up Fees
There are some factoring companies that start charging fees as soon as a potential client applies for healthcare factoring services. Set-up fees range from a minimal application fee of $25 to a hefty origination fee of $500. In some cases, factors will add in individual fees for due diligence procedures (i.e. running credit and background checks) and legal documentation fees (i.e. assembling legal documents and filing liens). When all is said and done, a new factoring prospect could be $1,000 out of pocket before knowing if he/she has been approved for funding.

When business owners are comparing and contrasting factoring companies, it’s important to inquire whether the factor charges specific set-up fees. Sometimes, the factor will say yes, and sometimes it will say no. It’s up to the business owner to decide whether or not the factoring services outweigh the start-up costs before moving forward.

Administrative Fees
In addition to application, origination and due diligence fees, some factoring firms charge their clients for the time it takes to compile and ship legal documents, billing for postage, long-distance phone calls, photocopying documents and/or time spent on the computer while assisting their clients. There are also fees associated with funding procedures. Most factors will institute set prices for a same-day wire or an overnight transfer of funds.

When a business owner is contemplating the notion of factoring his/her receivables, it’s important to factor any administrative costs into the equation. Without doing so, a business owner could wind up paying a lot more than he/she had initially anticipated.

Penalty Fees
The last way a factoring firm could potentially squeeze in some additional “hidden fees” is when it assigns fees for various “penalties.” Under this umbrella of penalty fees, a factoring firm could designate fees for misdirected payments, early termination of a contract, aged invoices, expedited funding (within 24 hours or less), not hitting a monthly minimum factoring requirement or going over the maximum allowable factoring amount. In addition, a healthcare factoring firm could also penalize its client by holding onto the funds within the reserve account (cash that is owed back to the client once payments have been received).

When choosing an accounts receivable factoring company, business owners should take the time to read all of the terms and conditions before signing on the dotted line. Entrepreneurs should not be afraid to dig deep into the factoring contract and ask a question when something is unclear. Otherwise, those hidden fees hidden fees will reveal themselves at a point where it’s too late to re-negotiate the terms.

So in conclusion, it does appear that the factoring industry is similar to the airlines industry in that players in both are notorious for charging “extra fees.” The plus side to this realization, however, is that both industries also have some players who stand firm in their “No Extra Fee Policy.” The bottom line-much like when shopping for the best airline deal, it’s extremely important to look at the all-inclusive price, including possibly extra fees, before agreeing to do business with an accounts receivable factoring company.

About the Author: Philip Cohen is the founder and president of PRN Funding, LLC, which is an extraordinarily focused niche player in the healthcare staffing invoice financing market place. Through a process known as factoring, PRN Funding provides business owners with the financial resources needed to grow and effectively compete in the industry. With no minimums or fixed terms, PRN Funding provides medical staffing agencies with flexible and immediate access to capital. We give you the freedom to factor what you want, when you want, whom you want, for as long as you want. Prior to founding PRN Funding, Mr. Cohen was an executive officer of The MRC Group, a national provider of Medical Transcription Services. Contact Philip Cohen at toll-free 866.776.5407 or via email at  pcohen@prnfunding.com. Please visit PRN Funding, LLC on the web at http://www.prnfunding.com/

Article Source: EzineArticles Freedom From Factoring Fees

Factoring account receivables is helping health care companies through these tough economic conditions opening the door to earning opportunities for cash flow consultants.

FactoringInvestor (FI) caught up with Phil Cohen, Founder and President of PRN Funding, LLC, to fill us in on the specialized niche of healthcare funding.

FI: What transactions will your company consider funding?

PRN: PRN Funding, LLC has a very specific niche in healthcare funding. We provide factoring to vendors who sell goods or provide services to medical facilities. Moreover, our client base consists of medical staffing agencies, private duty home care agencies, medical transcription services, medical billing and medical coding companies and medical supply companies.

FI: How did you get your start in the factoring business?

PRN: Prior to founding PRN Funding, LLC, I spent the better part of a decade acquiring medical transcription firms as a national roll-up strategy. During this time, I noticed a trend. Many of the medical transcription services were well-run firms; however, they were selling their companies because of cash flow problems. Seeing this cash flow problem, I was able to identify an opportunity to help them – accounts receivable factoring. Over time, I’ve been able to expand into other healthcare vendor niches, including medical staffing, medical coding, medical billing and medical supplies.

FI: What unique benefits does your company provide?

Industry Expertise: PRN Funding, LLC understands the unique characteristics of the healthcare vendor industry. We are very familiar with traditional payment terms, industry jargon and day-to-day procedures associated with the healthcare vendor industry.

Extreme Flexibility: PRN Funding offers the utmost in flexibility to vendors who sell goods or provide services to healthcare facilities. Our clients choose when, who, how much and how long to factor their invoices.

No Hidden Fees: PRN Funding does not charge the following:

• Application Fee
• Origination Fee
• Due diligence Fee
• Legal and documentation Fee
• Administrative Fee
• Early Termination Fee

FI: What do you consider the best methods for finding deals?

PRN: Aside from our web site, PRN Funding relies very heavily on our brokers and cash flow consultants to refer us deals. In fact, we value our referrals from brokers so much that we’re running a special promotion right now. The next 15 people who refer PRN Funding a deal will receive a $25 Starbucks gift cards in addition to the normal commission. We will send out the gift card, regardless of whether the lead becomes a client or not.

FI: How do you handle commissions to brokers or consultants?

PRN: We pay our brokers 10% of the fees we make for the life of the deal.

FI: What advice would you give to new professionals just starting out in the industry?

PRN: Now is a great time to get into the cash flow industry. Traditionally, small business owners relied heavily on credit cards to fund their business operations when they were not eligible for bank financing. The current economic situation has recently prompted many credit card companies to drastically reduce credit lines and raise interest rates for their customers who use small business credit cards. As a result, these business owners are in desperate need of a new alternative financing method to fund their business, and cash flow consultants have all of the tools to match those business owners with the appropriate funder.

FI: What is the most common business mistake you see people make?

PRN: The most common business mistake I see brokers make is that they present a lead to us without pre-qualifying it beforehand. It’s important for a broker to accurately assess a prospect’s need for funding and then match it with a funder who understands the prospect’s business model.

FI: Given the current economy, have you made any changes in the way you transact business?

PRN: In light of the changing economic climate, PRN Funding made the decision to branch out into a brand new healthcare funding niche. We formally launched PRN Funding’s home care factoring program in February. We recognized how long it takes for state-funded programs to pay private duty agencies, and we wanted to address the dilemma by offering these companies a factoring solution.

In addition, although there are more business owners applying for factoring as a result of the economic crisis, the quality of some of those applicants has gone down. Therefore, PRN Funding has had to tighten up on our due diligence process. Things that we may have been lenient on in the past, we are no longer able to do so.

FI: Where can people contact you to obtain more information?

PRN: Visit our web site: www.prnfunding.com

Call our toll-free number 866.776.5407 and ask to speak with our Broker Liaison, Nikki Flores

Visit the Cash Flow Consultant and Factoring Broker News section of our blog: www.TheFactoringBlog.com

FI: Is there anything else you would like to share with our readers?

PRN: It’s important for brokers and cash flow consultants to know that in general factoring firms do not operate as a one size fits all operation. Each factor has its own funding “sweet spot” that separates it from other factoring companies. For example, some factoring firms require a minimum ongoing factoring amount, while other specialize in factoring companies in one specific geographic region. In addition, there are other factoring firms who cater their services to a specific industry. Therefore, brokers should look at each transaction as a unique opportunity and strive to match it with the appropriate factoring firm.

FI Summary: Helping businesses raise cash through factoring account receivables is one of many cash flow categories where consultants can earn commissions by referring transactions to funding sources.  Factoring health care invoices is a specialized niche of the factoring industry