Having been turned down for a loan from a bank a Neurology center was about to abandon its growth and expansion plans. Without the capability to turn existing receivables into cash for the expansion, all hopes were lost.
The CPA that worked with the healthcare provider knew that there was close to one million dollars tied up in their 30 day and 60 day receivables. This totaled more than enough to fund the expansion construction and still have enough left to market the new services and treatments being offered. Knowing that the receivables could be turned into cash through factoring, the accountant called Xynergy Healthcare Capital to get a factoring relationship started. He also knew that the underwriting criterion for creditworthiness was found in the Neurologist’s debtors – the medical insurance carriers like Blue Cross, Aetna, Cigna, Medicare, Medicaid and other huge insurance entities.
The cost for the financing based on the average days to payment was going to be about 4% of the revenue generated. The rhetorical question remains; is 4% of ones bottom line worth doubling the income through factoring? As long as the business can afford this cost, the answer is obvious!
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