Using Factoring to Fix Hospital Cash Flow Issues

A form of medical financing, one that is becoming increasingly popular for its convenient benefits to revenue and cash flow, is hospital factoring. The basic principal behind this variety of factoring is to finance the hospital’s claims with an outside source to cut down on standard or even prolonged wait-times with insurance companies. Financial stress might affect a hospital for a variety of reasons unrelated to their fiscal credibility. The pressures of providing for facilities, equipment, technologies, and staff payroll are constantly present and, because of them, cash flow can be difficult to sustain at a manageable rate. Factoring offers a way to more immediately relieve the stresses of these elements, giving a hospital the freedom of having working capital while waiting for pending transactions to be fulfilled.

Choosing Between Factoring and an Asset Based Loan 

A method similar to factoring that many hospitals look to for medical financing solutions is asset-based financing, one that works with the available assets currently possessed by the hospital itself. Equipment, property, accounts receivable, and inventory are all considered in the approval to finance certain medical claims. Essentially, lines of credit built by asset based loans are backed by the hospital’s actual means. In comparison to factoring, a larger amount of preexisting financial credibility is necessary for these loans to be effective. Hospitals that need quicker, more efficient solutions to problems with cash flow or problematic payroll scheduling should consider factoring as the more relevant option.

Factoring as an Alternative to a Line of Credit

Favoring factoring over asset based loans is not only a decision that is more applicable for hospitals needing a faster solution, but for hospitals that might not have a conventionally established line of credit. Building traditional lines of credit as a hospital can involve a lot of time, small print, and the pressures of being indebted to underwriting requirements. Factoring is an easier-to-obtain and more flexible alternative to relieving severe cash flow-related stress without relying on long-term loan repayment.

Find a Factoring Finance Plan Specialized for Your Hospital

The reasons to pursue factoring as a more flexible medical financing plan are all determinant on the specific hospital’s relevant needs. Other medical facilities have different interests and a different relationship to their revenue and assets than fully functional hospitals. Financing options like traditional loans or asset based loans are beneficial toward building lines of credit, but aren’t necessarily the most convenient option for fiscal issues that need to be resolved more immediately. Factoring is often a go-to for businesses looking to solve cash flow issues, and for hospitals, this form of financing can be an expedient way to alleviate the burdens of fiscal inflexibility.

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