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Unpredictable payment cycles are a constant challenge in the medical staffing industry. Facilities like hospitals and clinics often take 60 to 120 days to process invoices. Yet, agencies are expected to meet weekly payroll and cover recruiting costs without delay.
Medical staffing factoring offers a strategic way to close that gap. In this arrangement, a factoring company converts your unpaid invoices into immediate working capital, allowing you to operate without financial bottlenecks.
However, factoring isn’t just for struggling agencies. With a reliable healthcare factoring company, it becomes a smart cash flow tool for scaling your business.
Read on to explore how this can unlock your cash flow within 24 to 72 hours.
How Healthcare Staffing Factoring Works
Let’s Put Your Outstanding Invoices In Motion — Fast
At Business Factors & Finance, we simplify healthcare accounts receivable factoring so your agency can focus on placements, not payment delays.
Here’s how our process works:
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Forward Your Outstanding Invoices
Send us a copy of the invoice you issued to your healthcare client. Once received, we begin the processing and verification.
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We Verify the Invoice and the Client
We review the invoice details and conduct a credit check on the healthcare facility responsible for the payment.
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Get Paid a Percentage Upfront
We advance up to 96% of your invoice value, depending on the credit checks. The rest is held in reserve until the client makes full payment.
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Receive Remaining Balance
We release the reserve amount once the client pays in full and after subtracting our factoring fee
Costs and Fees
Comparing Cash Flow Solutions for Staffing Agencies
Placing healthcare professionals like nurses, therapists, or allied health professionals typically involves dealing with high upfront payroll costs long before client payments come in. To bridge that gap, many firms explore various funding options.
Before we delve deeper into medical staffing factoring, here’s a side-by-side look at the financing methods commonly used by agencies:
How Factoring Fees Are Structured
Fee structures can vary from one healthcare factoring company to another, and it’s essential to understand how these models affect costs.
Most nurse staffing factoring agreements use a monthly or weekly pricing model, each with implications depending on how quickly your clients pay.
Example 1: Monthly Fee Model
Suppose your agency factors a $100,000 invoice with a 90% advance rate. You receive $90,000 upfront, while the remaining $10,000 is held in reserve.
If the factor charges a 2.5% monthly fee and the invoice takes two months to collect, you’ll pay $5,000 in fees. After deductions, you’ll receive the remaining $5,000 from your reserve. This model works well if your clients tend to pay within 30 days, but it becomes more expensive if payment takes longer.
Example 2: Weekly Fee Model
Now, consider the same $100,000 invoice, but with a 0.75% weekly fee ($750).
If your client pays in five weeks, the total cost is $3,750, which is less than the monthly model in this scenario.
However, if the invoice takes eight or more weeks to settle, fees may surpass the flat monthly rate. Weekly pricing works best when your client base reliably pays on shorter timelines.
Hidden Fees and How to Avoid Them
When comparing offers from medical staffing factoring companies, it’s wise to look beyond weekly or monthly fees. Some agreements contain hidden charges that can eat into your margins, like the following:
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Monthly Minimum Requirements
Certain factoring providers require you to factor a minimum dollar amount each month. If your agency’s volume fluctuates, missing the target can trigger additional fees.
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Administrative and Add-On Charges
Processing fees, credit check charges, and wire transfer costs may seem minor but can add up quickly.
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Long-Term Contracts
Some agreements come with long lock-in periods. Ending the contract early could cost you cancellation penalties.
Practical Tips to Avoid Hidden Fees
To get the most value from invoice factoring for nurse staffing, it pays to ask the right questions before you sign.
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Request Full Fee Transparency
Get a complete fee schedule up front, including all service-related charges and any penalties.
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Choose a Reputable Healthcare Factoring Company
Work with a factoring company that understands medical staffing cycles and offers straightforward terms.
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Track Payment Activity Regularly
As you work with your factoring partner, it’s best to review how invoices are processed and reserves are released. Staying involved helps you avoid surprises that can affect your cash flow.
Why Your Business Needs Healthcare Staffing Factoring
Keep Expanding, Even When Clients Take Their Time
Growth in healthcare and nurse staffing often moves faster than your payment cycles. When new contracts roll in and recruiting ramps up, access to capital becomes a strategic advantage, not a nice-to-have.
That’s where factoring for healthcare providers and staffing agencies fits in. As your billing volume increases, so does your available funding. It’s a cash flow system that grows with you without outside investment or lengthy loan approvals.
Best of all, when you partner with responsive medical staffing factoring companies, you can move quickly on new opportunities without pausing for collections or paperwork.
Industries That Benefit From Factoring
Flexible Funding That Meets Demands Across Sectors
This funding solution can take various forms and benefit businesses across industries, including healthcare accounts receivable factoring.
Information Technology Factoring
Truck/Freight Factoring
Oil & Gas Factoring
Staffing Factoring
Telecom Factoring
Wholesale Distributing Factoring
Recourse vs. Non-Recourse Factoring
Which Model Fits Your Business Needs?
The structure of your agreement also matters when factoring healthcare receivables. Recourse and non-recourse options both offer quick funding but differ in handling payment risk.
Recourse Factoring
Non-Recourse Factoring
Recourse factoring offers upfront capital based on your outstanding invoices, but your agency remains financially accountable if your client fails to pay.
Benefits of Recourse Factoring
- The qualification process is generally more straightforward since the factor doesn’t assume the risk.
- Larger advance percentages may be available.
- Lower factoring fees make it more cost-effective.
Common Risks Associated With Recourse Factoring
While recourse factoring may offer higher advance rates and lower fees, it also requires taking on more risk and responsibility.
- You must either replace the invoice or repay the advance if a healthcare client fails to pay.
- If multiple invoices go unpaid, your access to future funding may be reduced or suspended until those balances are resolved.
- Managing collections and disputes can increase operational burden.
Non-recourse factoring shifts more risk to the factoring company. If a customer goes out of business or fails to pay, the factor absorbs the loss.
Benefits of Non-Recourse Factoring
- You won’t absorb the loss if a client defaults.
- Credit checks are handled by the factoring company, helping you assess the reliability of your clients.
- You can offload collections and follow-up tasks, freeing internal resources to focus on staffing.
Common Risks Associated With Non-Recourse Factoring
This factoring structure offers peace of mind but has stricter requirements and other limitations.
- Factoring rates tend to be higher to account for the added risk assumed by the factor.
- Only invoices from credit-approved clients will qualify. New or financially unstable facilities may be excluded.
- Advance percentages may be slightly lower than recourse agreements, which could impact short-term liquidity.
A Quick, Reliable Way To Access Business Capital
Business Factors & Finance offers non-recourse invoice factoring for nurse staffing. That means no chargebacks if your client doesn’t pay and more freedom for your agency to grow.
Let us help you protect your cash flow without the added risk. Our team can walk you through the process and help you find the best setup for your needs.
FAQs
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Is medical staffing factoring a loan?
No, it’s not a loan. Factoring healthcare receivables involves selling your unpaid invoices to a factoring company in exchange for immediate cash, so you’re not taking on debt.
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What types of healthcare staffing agencies benefit from factoring?
Agencies that place nurses, therapists, locum tenens providers, and other allied health professionals benefit from factoring for healthcare providers. This is especially true when they serve clients with long payment cycles.
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Will my clients know I’m using a factoring company?
Yes. With medical or nurse staffing factoring, your clients are notified since payments are redirected to the factor. That said, factoring is widely accepted in the staffing industry, and reputable providers handle all communication professionally to preserve your client relationships.