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Medical facilities that bill to Medicaid, Medicare and other major insurance companies may occasionally experience cash flow difficulties due to delays in payment from these insurers and increased demands for services from patients. These monetary shortfalls can present problems in managing staffing costs, operational expenses and other necessary expenditures in the healthcare field. For healthcare providers in need of added flexibility in handling these ongoing obligations, accounts receivable loans can often provide added financial resources to weather the gap between the delivery of medical services and payment by insurance companies.
How Accounts Receivable Lending Works
Banks and other traditional lenders offer loans based on the credit worthiness of the borrower and an assessment of their ability to repay those loans. These lending institutions are limited in the types of collateral they can accept; real estate, medical equipment and vehicles are the most common forms of security used for these loans. By contrast, accounts receivable (A/R) factoring and lending arrangements use outstanding invoices to collateralize loans. The healthcare provider receives funds almost immediately on these accounts receivable loans, allowing administrators at the facility to manage financial obligations in a timely way.
The A/R Loan Application Process
A/R lenders typically look at the creditworthiness of the companies or agencies that owe money to the borrower. Medicare and Medicaid invoices offer the greatest security for the asset-based lender; these debts are guaranteed by the full force of the federal government. Major insurance companies are only slightly less reliable in terms of collateralization. By using these debts owed as collateral for short-term lending arrangements or lines of credit, medical facilities can often acquire necessary operating funds to manage cash flow difficulties more effectively.
Advantages of A/R Loans
Typically, A/R lending arrangements can be evaluated much more quickly than traditional banking loans. Some elite firms offer decisions within one or two business days. Disbursements can be made more quickly as well, making these loans an ideal way to manage financial emergencies or unexpected shortfalls for healthcare providers. Lines of credit are especially useful because they can be used and replenished as cash flow needs dictate. By adding these financial tools to the medical facility's lending portfolio, administrators can ensure a steady supply of funds to manage ongoing expenses.
Asset-based lenders like 1st Commercial Credit deliver fast turnaround times for A/R lending arrangements. The rapid response and prompt funding of loans and lines of credit for Healthcare Providers can prove an invaluable asset for smaller medical facilities that depend on invoice payments to meet their continuing financial obligations.