Need Cash? Try Accounts Receivable Funding

By: Michael Koslow

I'm trying to expand my business; I need to find a way to fund and grow my business without incurring debt. Am I stuck?

Expanding a business invariably requires cash infusion. Traditionally, we think of two ways to do s borrowing money (debt) and selling stock (equity). While both are viable methods, they're not the only, nor necessarily the best, option for a DME/HME provider's growth. A third tool is accounts receivable funding, which uses your non-performing asset, your receivables, and turns it into readily available cash.

Borrowing Money is easily understood and offered by a wide variety of lending institutions. However, any DME/HME owner who has gone to a bank has experienced the limitations of debt financing. Small businesses are often disqualified and personal guarantees are usually required. Most credit lines are limited and insufficient due to the bank's "under-valued" valuation of assets. Consequently, your credit line can easily "max out" and you will be right back where you started. Finally, there are other fees along with the interest rate that increase the "real" cost of borrowed money.

Selling Stock has the advantage of no interest payments and you have not increased your borrowing. However, by selling stock, you often relinquish significant ownership. Your investors may not understand your business and often seek to exercise control that limits your decision making. Finally, they take a significant share of your profits, which becomes costly over the long run.

Medical Accounts Receivable Funding (MAR Funding) utilizes an asset, your accounts receivables, to generate cash flow without borrowing money or selling stock. Every DME/HME provider can "cash in" their medical claims, that are awaiting payment, for immediate use to fund your expansion. The advantages of MAR Funding include no funding caps and availability grows as you expand your business, without going through yet another application process. And, there are no costs incurred when not in use. The challenge is that MAR funding can only be utilized through a very specialized funding company.

DME/HME providers should evaluate all these financial tools when selecting a strategy for expanding their business.

Money Management
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