Healthcare invoice finance helps businesses who are waiting on payments from the NHS or local councils for work carried out within the social care sector.
The private care sector is booming as the Government opens up contracts to independent suppliers. However, there is a problem.
The public sector can be notoriously late to pay which means many of their suppliers will find themselves waiting for a paycheque.
If you’re one of them, and in the healthcare sector you might want to look at invoice finance.
What is Healthcare Invoice Finance?
Healthcare invoice finance is a financial product enabling businesses within the care sector to stay ahead of their cash flow needs. It works by converting the value of unpaid invoices into immediate funds, making those funds available for use within 24 hours in some instances. Acting almost like a loan, invoice finance providers take up the role of debt collection on behalf of businesses, offering them the flexibility to receive their profits earlier than they would if they were waiting on payment from customers.
This product can be an invaluable source of working capital that helps keep businesses running smoothly and helps spur growth as increased operating capital leads to more opportunities for expansion, as well as allowing you to pay your staff’s wages, purchase equipment, buy much needed medical supplies and most importantly ensure the patients under your care are looked after.
Late payment is a growing problem for SMEs of all kinds, but it seems to be a particularly severe issue in the public sector. Recent research from the Federation of Small Business found that 90% of public sector suppliers are hit by late payments. Even when they are not, payment terms can be lengthy – often moving beyond 30 and 60 days. This is creating an enormous problem in the public sector supply chain which can put the future of some of the Government’s key contractors at risk, this is why invoice factoring government contracts is a perfect fit.
The FSB is calling for the Government to levy penalties against those departments which pay their suppliers late. Labour has also announced plans to force the public sector to pay its suppliers on time. Even so, you can forgive suppliers for feeling sceptical about waiting on the Government to change its ways.
Types of Finance for the Healthcare and Care Sector
Whether you are already running your own healthcare business in the care home or domiciliary sectors, or simply considering starting up, we can help you find the right type of funding option to help you build your business:
We can help you secure the following types of business finance for your healthcare company:
Invoice Factoring
Invoice Factoring for healthcare businesses is when you sell your invoices to a third party lender. It’s a form of invoice finance and will give your business an effective way to improve its cashflow position.
The healthcare factoring company provides the credit control service to recover payment of the unpaid invoice. Invoice factoring companies allow you to release cash from your unpaid invoices quicker than having to wait between 30 to 90 days – and sometimes up to 120 days – for your customers to pay you.
Invoice Discounting
Invoice discounting is a financial solution that allows a healthcare businesses to convert unpaid invoices into necessary funds. This type of financing enables companies to free-up their own cash flow in order to ensure that their core business needs are met, such as providing wages for staff or paying suppliers. It’s perfect for companies that are looking for short-term solutions because you’re only charged an interest rate on the funded amount. This means that once an invoice has been paid, it ceases to be included in the discounting agreement and all debt clears without any long-term commitments or liabilities.
You no longer have to wait up to 120 days to receive payment for your goods and services, and you remain in charge of your own credit control processes, meaning that you continue to chase late payments and therefore your customers are not made aware of our involvement.
How Healthcare Invoice Finance works
Invoice finance is a popular financing solution for healthcare businesses of all sizes. It works by releasing cash typically tied up in unpaid invoices and can help to ensure the smooth running of the business. Invoices are sent to the invoice finance provider, who then pays out a large percentage of their value upfront.
The client then pays back the amount advanced plus interest once customers settle the invoices. This helps to meet immediate operating expenses and keep cash flow healthy – a valuable asset for any growing business. The process is simple yet effective, allowing businesses to better manage their finances without taking on additional debt or equity investments.
Most invoice factoring companies in the UK pay in two instalments, the first covering the bulk of the receivables. The remaining amount usually 5-10% when your client settles their invoice, minus any factoring fee. A simple process of the invoice factoring agreement are as follows:
1. You deliver your goods or service and invoice your customer as normal.
2. You send us a copy of the invoice (uploaded via our online portal).
3. We make available up to 90% of the invoice value.
4. You decide how much you want to draw and we transfer funds into your bank account, same day.
5. When your customer pays the invoice, the balance (10%) is released to you.
Invoice finance only covers healthcare business to business transactions. Each factor will have their own set of conditions that determine whether a business is eligible, so the requirements for obtaining an asset based lending service will vary. Specifically, qualification may depend on the company’s turnover, and requirements will vary from industry to industry.
Domiciliary Healthcare Finance
Recognizing the complexity inherent in the domiciliary healthcare sector, we tailor our approach to suit your unique business requirements, particularly in the realm of invoice finance. Our collaborative process ensures a seamless financing journey, where we delve deep into your business model and needs, aligning you with a factoring company attuned to your nuances.
Through a secure credit facility, powered by invoice finance, you gain the freedom to fulfill contracts, carry out caregiving duties, and invest in essential technology and equipment, thereby elevating the quality of service provision.
The amount of invoice finance accessible to your domiciliary care venture is typically determined as a percentage of your outstanding debtor book or sales ledger.
Certain constraints may apply, such as limitations on exposure to a single dominant customer, often the local authority or an NHS Trust. This ensures prudent risk management while still empowering you to harness the financial stability required for sustained growth and success.
The Benefits
- Released cash in 24 hours after invoices are raised
- Receive up to 95% of the invoice amount
- Credit control can be fully managed or confidentially kept in-house
- Improves working capital cash flow for your business
- Negotiate better terms with your suppliers
- Bad Debt Protection (BDP) can be added to protect against non-payments
- Debenture taken on company and no personal guarantee
F.A.Q’s
Can Invoice Factoring help my care business
Yes Invoice Factoring can assist any healthcare business with cashflow funding. It will advance cash against your unpaid invoices.
Can you assist if we use a system such as CM 2000 Care System
Yes the CM 2000 System is more water tight than the traditional time sheets used by carers.
Do you fund all Domiciliary Care businesses?
We are happy to fund any business but we only fund contracted work e.g. Council and NHS contracts. We do not fund private service users.
Get a finance quotation for your Healthcare Business
If you are a business owner of a healthcare business and carry out regulated activities such as domiciliary care, and would like to know the benefits of using invoice finance for your company, simply make contact on 01246 233108 or complete an online enquiry and one of the healthcare support team will return your call.
Seasoned professional with a strong passion for the world of business finance. With over twenty years of dedicated experience in the field, my journey into the world of business finance began with a relentless curiosity for understanding the intricate workings of financial systems.