The Accounts Receivable Factoring Alternative

Fortunately, there is an excellent alternative underutilized financing option that can keep a company’s cash flow going – private duty care accounts receivable factoring. As opposed to a more tradition form of financing, such as a small business loan, private duty care accounts receivable financing is not a loan at all. In this type of funding arrangement, a factoring firm purchases the rights to the private duty agency’s invoices, advances cash immediately on those invoices and then collects on them.

The best part about accounts receivable financing is that credit decisions are based on the creditworthiness of the private duty agency’s customers (i.e. Medicaid, VA or other governmental agency,) rather than the agency itself or the business owner’s personal credit. This allows the business owner to leverage the higher quality of their customers’ credit in securing funds. (NOTE: Private duty care factoring companies cannot purchase invoices that are payable directly by individuals because evaluating the credit of an individual is far more difficult than leveraging the government’s creditworthiness).

Keep in mind that many private duty care factoring companies can also work with start-up companies. In addition, small and large companies that are going through a rapid growth phase can also factor their private duty care receivables. What’s more, many factoring firms are able fund receivables without requiring the private duty agency owner to sign a personal guarantee, which lets the owner protect his/her personal assets. What’s more, private duty care factoring arrangements tend to provide generous lines of credit because factors are able to set credit limits and increase their funding as their clients’ businesses grow.

So How Does Private Duty Care Factoring Work?

Let’s say that the owner of a private duty care agency sent employees into an elderly person’s home to assist that person throughout his/her daily activities. The agency owner then bills Medicaid for the services provided. Because it takes time between when the agency owner sends the invoice and when Medicaid actually pays for the home care services, the agency owner can sell that invoice to a private duty care factoring firm and receive roughly 80 percent of what was invoiced immediately. In turn, Medicaid payments are sent to the factor. Once the factor is paid, the firm will deduct its fees and return the balance back to the agency owner.

Factoring firms come in all different shapes and sizes, and they are spread out all over the country, and each offers their own twist to the invoice funding model. Therefore, it’s important to take the time to research factoring companies and select the best one to meet your private duty home care agency’s financing needs.

In a time when more banks and credit card companies are saying “no,” private duty home care agency owners should look into accounts receivable factoring as a viable alternative financing option.

Nikki Flores is a Consultant Liaison for PRN Funding, LLC, which is an extraordinarily focused niche player in healthcare factoring.

PRN Funding exclusively factors the accounts receivable of companies that sell goods or provide services to healthcare providers.

In fact, there are many companies (i.e. respiratory therapist staffing agencies, radiology tech staffing firms, and physical therapist staffing agencies) that can greatly benefit from all that allied health staffing factoring has to offer. Namely, growing their companies without having to worry about how long it will take for their customers to pay them.

In order to help clear up any healthcare factoring misconceptions, this article will explain the allied health staffing factoring process step-by-step…

1.  The customer (i.e. hospital, medical clinic, nursing home, etc.) approaches an allied health staffing company to fill an open shift.

2.  If it’s a new customer, the factoring firm performs a credit check on the medical facility and if approved, determines a line of credit for that customer.

3.  The staffing firm provides the medical facility with a temporary employee to fill the shift.

4.  The agency issues an invoice to the medical facility for the shift, making sure to include the factoring firm’s remittance information directly on the invoice.

5.  At any time after the invoice has been issued, the allied health company submits a schedule of accounts receivable for purchase to the factoring firm. In addition to the invoice, this schedule also includes any supporting documentation (i.e. signed time-sheets).

6.  The invoice funding company will contact the staffing agency’s customers from time to time to verify that they are actively using temporary employees from the agency. Upon verification of the invoices, the factor will electronically advance funds within hours.

7.  Per the remittance information included on the factored invoice, the medical facility sends payments directly to the factoring firm’s lock box.

8.  Upon receipt of the payment, the factor remits the difference (reserve) between the collected amount and the advance to the agency, less the discount fee.

Selling invoices to a factor improves the agency’s cash flow, allowing business owners to meet payroll, taxes and other monetary obligations in a timely manner. Thanks to this article, business owners are able to easily familiarize themselves with the factoring process. The next step in improving their cash flow is to start researching which allied health staffing factoring firm will best meet their company’s cash flow needs.

Philip Cohen is the founder and president of PRN Funding, LLC, which is an extraordinarily focused niche player in the allied health 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 allied health staffing companies with flexible and immediate access to capital.

Article Source: Ezine Articles – A How to Guide – Allied Health Factoring