Tweet

Private Duty Agencies can Factor in Today’s Banking Crisis

Guest post by: Phillip Cohen

Article Overview: Private duty firms who need to obtain cash immediately to help prepare for the influx in business are left without many traditional funding options once the bank says ‘no.’ Fortunately, there is an alternative source of financing available to these agencies: private duty factoring.

Private Duty Agencies can Factor in Today’s Banking Crisis

Private duty agencies wanting to keep up with increased demand will need to hire additional employees. Traditionally, home care agencies have approached a bank in order to finance their anticipated growth. Unfortunately, veteran private duty firms looking to expand as well as private duty start-ups are finding it increasingly more difficult to finance their businesses through a bank. In general, obtaining bank financing is difficult for a small business that is less than three years old, and the current economic climate has hindered their efforts even further. Currently, only companies with multiple years of a solid operating history are being considered for approval at a bank. Private duty firms who need to obtain cash immediately to help prepare for the influx in business are left without many traditional funding options once the bank says ‘no.' Fortunately, there is an alternative source of financing available to these agencies: private duty factoring.

Accounts receivable factoring is similar to a bank loan in that a private duty business owner is able to draw on an established line of credit. However, factoring is more advantageous for business owners because unlike with banks, factoring firms base their credit decisions on the creditworthiness of a business' customers. This means that private duty agencies can levy the creditworthiness of their government-backed payers (i.e. Medicaid) instead of the company's credit or the business owner's personal credit. Thus, even if a home care agency owner has bad credit, he/she is still able to receive financing by factoring his/her receivables.

In addition, business owners do not have to worry about muddying up their balance sheet when they factor their receivables. Factoring is not a loan. When private duty business owners present their receivables to a factoring firm, the factor purchases the invoices and advances a percentage of it immediately. As long as the invoice is valid and the services were performed as promised, the private duty agency owner does not need to pay the invoice back. Instead, Medicaid or the agency's customers send payments to the factor.

Finally, unlike banks, which require a commitment of payments over a number of years, many factoring firms do not operate under a long-term contract. In fact, many factoring contracts are open-ended, meaning the private duty agency has the freedom to factor for however long it wants.

The demand for private duty home care is on the rise. In order to keep up with the increasing demand, start-up private duty agencies and veteran companies need to continue to grow, which means that cash flow will remain a serious concern. Even though bank financing has become more difficult to obtain, there is another viable funding option available-Private duty factoring. Factoring is an excellent way for business owners to solve their cash flow problems during this period of rapid growth because it has fewer restrictions, and it's easier to obtain than bank financing.

Related Articles
  Introduction to Private Banking
  Is Home Care Funding Right For Your Private Duty Agency?
  Factoring for Private Duty Care Agencies
  Financial Reform Bill Diversity Requirement Has Challenges
  Offshore Banking in Singapore
  SMEs in Africa - is capitalism really dead?
  Reputation Preservation in a Crisis
  VI. B. Banking Sector Development: WHAT DETERMINES STOCK MARKET DEVELOPMENT IN AFRICA?
  A New Era of Banking
  Bharatbook.com: Trend in credit and deposit growth and in-depth analysis of Indian Banking Sector
  Who Should You Use to Raise Your Capital?
  Canadian Business Banking - An Overview
  Top Three Common Mistakes to Avoid when Choosing a Nurse Staffing Payroll Factoring Company
  Ugandan Government Initiative to Subsidise Solar Power Equipment by 45% to be Implemented by Rural Microfinance Institutions (MFIs)
  Three Reasons Why Allied Health Staffing Agencies Should Factor Their Invoices
  Do You Know Where Your Disaster Recovery Plan Is
  Rebuilding Your Finances After an Economic Crisis
  The Lazarus Philosophy: The Danger of Expectations and The Beauty of Duty
  In a time of crisis, PR is your greatest asset
  What Are the Factors That Lead to an Economic Crisis?

Article Tags: private duty factoring, private duty factoring info, private duty home care cashflow



Related Forum Posts
How to valuate a business - Hi Garth - here is how we did it at Northern Crown Capital when I was helping them raise venture capital for Toronto-based entrepreneurs. Assume the start date is 2003 so 2008 projections are 5 years out: How Northern Crown Capital Valuates a Business 2008 Financial Projections Earnings Before Tax $5,865,000 Tax Rate 42% Taxes $2,463,300 Net Earnings $3,401,700 Amount Seeking to Raise Today $3,500,000 Discounted Value of Future Opportunity, 5 Years Out 2008 P/E Ratio 15 Value of Company in 2008 $51,025,500 Discount Rate Applied 30% Year 2008 $51,025,500 Year 2007 $35,717,850 Year 2006 $25,002,495 Year 2005 $17,501,747 Year 2004 $12,251,223 Value of Company at Investment in 2003 $12,251,223 Less: Investment Amount $3,500,000 Present Value $8,751,223 Discount for Risk & Private Company 40% Less: Discount for Risk & Private Company $3,500,489 Private Company Value $5,250,734 Present Value (What the Owner Keeps) $5,250,734 60.00% Financing (What the Investor Gets) $3,500,000 40.00% Total $8,750,734 100.00% I hope this helps!
Re: How to Get Your Business Funded - Check out fundsandloans.com they provide advice underwriting services, and business plan packaging for investment for final presentation to Private Investors
Re: The Storm Brace a new invention - Hi Breck, I sent you a Private Message - please check your "new messages link"!
Any experience with McManus UK Ltd.? - Did anybody already deal with any of the McManus UK Ltd offshore entities? I do have a program, but not enough cash. I have been advised that they can fund investors with access to Private Placement Programs but they don’t want to joint venture with me. They want a fee for the service. This is why I want to find out if anybody has had first hand experience with this group? Patrick Ohara, Financial Consultant
Re: private label rights - Just out of curiosity... how long has "Private label rights" been a business? On a related note, I've seen the proliferation of websites that sell term papers and articles for students, each one justifying their work because "in this day and age students are just too busy to keep up with school work, and knowing how to write isn't important anyway, and universities don't realize this and ask too much of you, so it's perfectly alright for you to buy your schoolpapers from us." I know it's not the same thing, but I think it's just sad...


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Why Your Own Internet Marketing Website Is A Must

ROSI Return on SUNK Investment

Promoting your company and self with verve

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.