Private duty agencies wanting to keep up with increased demand will need to hire additional employees. Traditionally, home care agencies have approached a bank in order to finance their anticipated growth. Unfortunately, veteran private duty firms looking to expand as well as private duty start-ups are finding it increasingly more difficult to finance their businesses through a bank.
In general, obtaining bank financing is difficult for a small business that is less than three years old, and the current economic climate has hindered their efforts even further. Currently, only companies with multiple years of a solid operating history are being considered for approval at a bank. Private duty firms who need to obtain cash immediately to help prepare for the influx in business are left without many traditional funding options once the bank says 'no.' Fortunately, there is an alternative source of financing available to these agencies: private duty factoring.
Accounts receivable factoring is similar to a bank loan in that a business owner is able to draw on an established line of credit. However, factoring is more advantageous for business owners because unlike with banks, factoring firms base their credit decisions on the creditworthiness of a business' customers. This means that private duty agencies can levy the creditworthiness of their government-backed payers (i.e. Medicaid) instead of the company's credit or the business owner's personal credit. Thus, even if a home care agency owner has bad credit, he/she is still able to receive financing by factoring his/her receivables.
In addition, business owners do not have to worry about muddying up their balance sheet when they factor their receivables. Factoring is not a loan. When business owners present their receivables to a factoring firm, the factor purchases the invoices and advances a percentage of it immediately. As long as the invoice is valid and the services were performed as promised, the agency owner does not need to pay the invoice back. Instead, Medicaid or the agency's customers send payments to the factor.
Finally, unlike banks, which require a commitment of payments over a number of years, many factoring firms do not operate under a long-term contract. In fact, many factoring contracts are open-ended, meaning the agency has the freedom to factor for however long it wants.
The demand for home care is on the rise. In order to keep up with the increasing demand, start-up private duty agencies and veteran companies need to continue to grow, which means that cash flow will remain a serious concern. Even though bank financing has become more difficult to obtain, there is another viable funding option available-Private duty factoring. Factoring is an excellent way for business owners to solve their cash flow problems during this period of rapid growth because it has fewer restrictions, and it's easier to obtain than bank financing.
Philip Cohen is the founder and president of PRN Funding, LLC, which is an extraordinarily focused niche player in the private duty factoring market place. Through a process known as factoring, PRN Funding provides business owners with the financial resources needed to grow and effectively compete in the industry. With no minimums or fixed terms, PRN Funding provides medical staffing agencies with flexible and immediate access to capital. We give you the freedom to factor what you want, when you want, whom you want, for as long as you want. Prior to founding PRN Funding, Mr. Cohen was an executive officer of The MRC Group, a national provider of Medical Transcription Services. Contact Philip Cohen at toll-free 866.776.5407 or via email at
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