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.

Many pawnshops are reporting that over half their customers are now small business owners that are basically pawning to meet payroll.

Lured by the high price of gold and ease of credit, they are bringing in everything from engagement rings to high end watches for a quick cash infusion as revealed in a recent article from CNN Money entitled Pawning Rolexes to Make Payroll (Source: http://money.cnn.com/2011/08/02/smallbusiness/small_business_loans_pawn_shop/index.htm)

While selling the gold is one option, using a pawnshop allows the business owner to utilize the assets as security for a loan. If the loan isn’t repaid within the specified time frame, generally 30 to 60 days, the pawnbroker keeps the items.

The advantage is fast cash without credit checks or restrictive guidelines. The downside of course is the interest rate. It’s not uncommon to see monthly interest rates of 5%, as reported by one business owner using gold and jewelry for a $20,000 loan.

Factoring Invoices – A Viable Alternative to Pawning for Payroll

Rather than pawning for payroll, small business owners can turn to less expensive options like selling accounts receivable. In today’s competitive market factoring fees often average less than 5%.

Instead of making a loan, factoring companies purchase outstanding invoices at a discounted rate. They look to the strength of the customer or debtor on the invoice instead of the business selling the invoice, making it a viable option for businesses that aren’t considered “bank quality” to traditional lenders.

To learn more about the factoring industry check out these articles:

Comparing Factoring Companies

How Factoring Brokers Earn Fees

Factoring Broker Training – Don’t Make These Three Mistakes

Comparing Factoring Companies

1. Application Fee

Some companies charge a “fee” to see if they will work with you. Although we are on the fence on this one, you shouldn’t have to pay more than $100-$150. Avoid companies charging big fees to “evaluate” what you have.

2. Due Diligence Fee

Basically the same fee as #1, but just by another name in our opinion. That doesn’t mean you pay for both. One flat fee (or no fee) is ok. Any reputable company is in it to do business with you over the long haul, not make money on upfront fees.

3. Minimum Number of Invoices

Factoring companies might require a minimum number of invoices to be factored – some will even require ALL your invoices be factored. We believe you should have the flexibility to pick and choose when you need to factor. Try to find a company that does not have a minimum.

4. Reserve Amount

All factors are going to have a reserve amount. They fund a certain amount upfront (say 80%) and the difference (20%) is the reseve. A reserve is typically 20-30% of the invoice amount, depending on the transaction. Anything greater and you may want to shop around. While you get a portion of the reserve back, you don’t want too much tied up on the back end.

5. Renewal Fee

This is a junk fee that some factoring agents charge annually. Either they want your business or they don’t. If they have this, make them waive it.

6. Invoice Copy Fee

Some funding companies will try and charge you to copy your own invoice. Really? Skip this funder altogether – it is a good indication there are a lot more hidden fees.

7. Long-Term Contract

Factoring companies would love to have you sign you to a long-term contract. Although it would not be fair for them to get you going and then have you jump ship right away, it is cost of doing business. If you are going for a contract, don’t go for anything longer than 6-12 months.

8. Help Screening New Accounts

Before taking on a new account, some factors will help you screen their credit worthiness. This can be a big plus and you should look for this when choosing factoring programs.

9. Discount Fee

Of course you want a low factoring or discount fee!  Just be sure to consider the overall picture and realize some factoring companies will advertise low factoring fees to lure in business only to hit you with some of these hidden fees or contract clauses before funding.

Although there are many things to consider when choosing a Factor, the above items should get you on the right track.

It is also helpful to make sure you are dealing with a professional funding company or factoring broker. Check out our updated Directory of Factoring Companies and Services Providers for more details.

According to the National Coalition on Health Care, the U.S. spent approximately 17% of its GDP in 2008 on health care costs. That percentage is expected to jump to 20% by 2017.

Doctors’ offices will soon be flooded by 78 million baby boomers as they become eligible for retirement. To handle this sudden influx, physicians will have little time for the day-to-day business operations of their practices and must focus primarily on patient care. As a result, medical billing companies are seeing increased demand for their services.

More and more doctors are outsourcing services to subcontractors, and these companies are reaping the benefits. However, due to the slow pace at which insurance companies approve patient claims, it takes a while for doctors to be paid, and in turn it takes even longer for them to pay their vendors, especially medical billing companies. According to the American Medical Billing Association, it takes an average of 90 days for paper claims to be reimbursed. Granted the advent of an electronic claims system has lowered reimbursement times, it is still problematic for companies to wait to be paid.

For example, an insured patient goes in to see a doctor. The cost of the visit is $100. Because the patient is covered for this visit, the doctor must make a claim to the insurance company and wait an indefinite amount of time for the claim to be approved. If the claim is not approved, the doctor must send more details of the visit. This increased lag creates a problem for doctors who would rather spend their time with patients than following up on claims. Therefore, doctors turn to experts and subcontract medical billing companies to handle these issues.

Whether they are start-ups trying to gain a market share of this ever-increasing business, or a veteran company trying to beat the slow-payments system of insurance companies and doctors, a viable and flexible option exists for companies called medical billing factoring.

Medical billing factoring is converting the accounts receivable of a business into cash by selling outstanding invoices to a ‘factor’ for a discount. Accounts receivable factoring gives the medical billing business immediate access to cash so that it can manage its operations more efficiently.

Instead of waiting months to be paid by doctors’ offices, medical billing companies can use factoring services to get cash now to pay for their employees and ongoing business expenses. They can also use the money to expand their businesses, such as hiring and training new employees or purchasing new equipment, in a time when the healthcare industry demands these companies more than ever.

Doctors need all the time they can get to provide care for their increased number of patients. While the amount of work has increased and the payments remain slow, outsourcing medical billing duties gives doctors more time with patients. By factoring their receivables, companies do not have to wait to be paid and can continue expanding their businesses in a market that is favorable towards this niche.

Philip Cohen is the founder and president of PRN Funding, LLC, which is an extraordinarily focused niche player in the medical billing 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 billing companies 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 reprinted with permission by PRN Funding, LLC.

*****Webinar Completed…stay tuned for another!****

Free Webinar – “Creating Positive Cash Flow – When the Bank says No!”

When: January 29, 9:00pm – 10:00pm (EST)

Two words: Cash Flow.

In these economic times it is not only survival of the fittest, it is also survival of the smartest. Cash Flow is your lifeblood. It can be the difference of making payroll or even keeping the lights on; and your bank may not be much help in 2009.

Fortunately there are realistic alternativesfor businesses being utilized every day. Strategies that not only keep you going during these times, but may also help you expand. But first, you need to know all your options.

Here is the great part

You can have free access to an informational webinar about alternative financing, factoring, and turning outstanding invoices into cash.

Whether you have a current financial business need, want to learn more about your options, or just want to find another way to make more money, **sign up here.**

Learn first hand from the source on how thousands of businesses are staying ahead of the pack (and their competitors).

What do you have to lose?

Nothing. The Webinar is Free! What if your business could become recession proof?

Don’t delay and make 2009 your best year ever!

*****Webinar Completed…stay tuned for another!****