The World of Medical Factoring and Accounts Receivable Funding

Right from the beginning let me first correct the title of this article. There is no “world” of medical factors, it’s more like a very small neighborhood.

Within the finance industry, lenders that are approached with funding opportunities involving healthcare providers as the borrower (or factoring client) tend to retreat and decline these types of applicants.

The obvious question is why?

Lenders love lots of collateral to secure their loans. The typical healthcare provider has very few assets to secure such lending. For example, if they have diagnostic equipment like x-ray or other imaging machines, these instruments are most probably leased, and therefore cannot be part of a collateral pool. Supplies and other expendable items will not qualify, and office equipment is valued so low as to negate any value thereof.

Remaining asset… is Accounts Receivable!

If the borrower was a commercial business selling to Wal-Mart, Sears or Marshalls, the A/R would be a very strong, reliable and predictable source of collateral. However medical receivables which are payable by third party payors such as Medicare, Medicaid, Blue Cross/Blue Shield, Aetna, Cigna etc…are not a predictable source of collateral. Although these insurance entities listed above are financially quite capable of paying their debts, the fact remains that typical lender have no idea how to understand medical A/R nor how to value them.

We all know that when we go to our physician, and he/she performs a procedure or an examination and the bill goes to our insurance carrier for $500.00, it is guaranteed that the insurance company will NOT pay that amount. Since typical commercial lenders do not have the industry specific understanding of how to value medical A/R, they usually want no part of financial transactions in which such an asset is the prime source of collateral…..resulting in the small “neighborhood” of medical industry lenders/factors.

There is a vast business opportunity found in Medical Receivables factoring.

You the reader, as a financial intermediary, should not shy from these money making transactions. The few funders that are comfortable within this niche do not expect the typical financial consultant to speak comfortably with medical providers as such efforts require a unique language and approach. Xynergy Healthcare Capital LLC, (as I am sure is the case with the few other healthcare factors in the marketplace) will provide the support and guidance needed to be successful in this highly lucrative field. Marketing materials, sales strategies and conference call capabilities are available to educate the consultant, and transition the applicant into a client. The education part starts with asking the question, which type of medical provider is best suited for healthcare factoring and more importantly, which ones will be a waste of time?

We begin with the biggest disappointment for the factoring consultant…..stay away from hospitals!

Trying to close a hospital for a factoring transaction is not intelligent use of a consultant’s time. Typically financial professionals in hospitals are very difficult to reach and any discussions with them will be very industry specific, precluding the usual broker from being able to develop the relationship. Unless you have done financial sales to hospitals in the past (or currently), you will not be able to present a credible initial introduction to the CFO of the facility. Additionally, hospital transactions require on-site audits and lengthy evaluations of A/R and the internal controls of the facility. Unless you have the industry specific skills, stay away from hospitals! So, where are those transactions that make sense?

There are many sub-sectors within the healthcare niche. Prior to addressing the most productive of these, let’s once again examine the least productive. Dentists cannot be factored based on the limited coverage associated with these plans.

Chiropractic, as a specialty, is perfectly fine for factoring but most chiropractors are paid by personal injury claims and workers’ compensation claims. Claims of this nature are contingency based and should not be factored. However, if one comes across a chiropractor that bills the standard insurance carriers (as illustrated before) that would be perfectly acceptable and “factorable.”

Sub-sector specific opportunities with the best possible outcome would be: imaging centers, surgical centers, medical transport, home health (both medical and home care), durable medical equipment, specialty practices (cardiology, gastroenterology, orthopedics, endocrinology, etc….), walk-in clinics, medical labs, hyperbaric chamber therapy, bariatric surgery centers, etc…

To summarize, although the availability of healthcare specific factors is quite slim, the few that remain would welcome the opportunity to work with you and grow your business to new heights, to include the healthcare arena. I certainly welcome calls from consultants if there is a potential transaction, or if the individual wants to receive some helpful tips.

This article was provided by the Author, Fred Leder, for publication with updates and originally appeared in the Dec 2011 issue of Cash Flow Exclusive.
Fred Leder Factoring With Xynergy Capital

Xynergy Healthcare Capital LLC is an industry specific finance company located in south Florida, with nationwide clients and referral sources.

For more information contact Fred Leder at (954) 519 2376 or by email at



  1. Hi,

    I am new to the Factoring business. I have been and still do broker real estate and business notes. I would like to get involved in the medical/healthcare niche. I would welcome any advise or information regarding factoring and the healthcare industry.

    My question to you is: Re: medical factoring, is it worth my time to try to get small
    medical practices such as general practitioners or internists to factor their invoices?

    You may e-mail me or contact me by phone at (718) 967-0564.


    Marc Forman
    M & M Financial

  2. I am curious about independent medical transcriber providing valuable services for doctors and medical offices. These individuals usually run a small operation from their home-offices and bill their clients upon delivery but not necessarily get paid right away.

    What has been your experience with this segment of medical services and what word of advice would you have in targeting this market.

    I look forward to hearing from you.


    Kenneth Daniels

  3. You really make it seem so easy with your presentation but I find this topic to
    be actually something which I think I would never understand.
    It seems too complicated and very broad for me. I’m looking forward for your next post, I’ll try
    to get the hang of it!


  1. […] type of receivables that are for sale, and you can then bring the transaction to the appropriate medical factoring company fitting the needs of that […]