What exactly is accounts receivable financing or “factoring” as it is called?
Receivables financing is simply the practice of having a funding source purchase at a discount your accounts receivable invoices (regardless of whether they are commercial invoices or medical insurance submissions) for an immediate cash payment. An advance of usually 80% is made immediately and the remaining 20% is held in reserve until such time that your customer or in the case of medical providers the insurance companies, remit full payment to the factor. They will then deduct their discount fee, which is based upon the time that it took for the insurance company to finally pay the invoice, and then forward the remaining balance to you.
