Although factoring is a great alternative funding option for any type of business, it's an especially good financing choice for companies who sell medical supplies to medical facilities and physicians' offices. Selling invoices to a factor allows medical supply companies to get paid quicker without going into additional debt. Moreover, companies who factor their receivables won't have to turn down orders anymore because medical supplies factoring enables them to have enough cash on hand to pay for those large orders. Still not convinced? Check out the Top Five Reasons for Medical Supply Companies to Factor Their Receivables: Reason #1: Get Paid Quicker.
Instead of waiting 30-60 days to receive payment after delivering medical supplies to a healthcare facility or doctors' office, medical supply companies can sell their invoices to a factor and receive cash within 24 hours of issuing an invoice. All a factoring firm needs to advance cash is a copy of the invoice and proof that the goods were delivered and accepted. This is easily accomplished with tracking numbers and digital signatures.
Reason #2: Leverage Your Customers' Credit.
Medical supplies factoring is a great option for companies who are either just getting started or who have less-than-perfect credit. Rather than make a credit decision based off of the medical supply company's credit, factoring firms determine their credit limits after reviewing the payment trends of the medical supply company's customers. This is usually accomplished by using a third-party credit bureau, and it's done in a non-intrusive way, giving medical supply companies the ability to secure financing based off of their customers' credit rather than their own.
Reason #3: Stop Worrying about Collections.
Keeping up with collections can turn into a full-time job, and it can become burdensome for a growing medical supply company to keep up with re-sending skipped invoices and keeping track of payments. Many factoring firms offer bookkeeping services in addition to medical supplies funding. Rather than chase after payments, medical supply companies can focus on more important things-like growing the business.
Reason #4: Avoid Debt.
Unlike traditional lending models, accounts receivable factoring is not a business loan. The medical supply company does not borrow money from a factoring firm; rather, the factor legally purchases the medical supply company's invoices at a discounted rate. The supply company simply issues its invoice, sells it to the factoring firm and receives cash up front, and then the factor collects on the invoice. No debt is created, so the balance sheet stays clean.
Reason #5: Never Have to Turn Down an Order Again.
Perhaps the most appealing reason why medical supply companies can benefit from factoring is that they will no longer have to turn down a new order. Cash flow gaps surface when a medical supply company has to order additional goods without being paid for previous orders. Factoring invoices helps close those cash flow gaps because the medical supply company gets cash within hours of verification instead of waiting weeks to be paid.