Financial Tools Available to Protect Your Business From Fluctuations in Revenue Cycle

The question of which financial tool to use in order to overcome fluctuations in revenue cycle arises very often as providers strive to keep up with pay overhead commitments and perhaps even have a few dollars left over to feel their business is not "hand to mouth."

The operative phrase shown above is "fluctuations in revenue cycle." There is no way to address this issue without evaluating the financial vehicles available to medical businesses and ascertaining whether these financing tools actually move concurrently with the regular occurring billing/overhead cycle (imitating the revenue cycle). Loans, of all kinds to include (but not limited to) lines of credit, asset based lines and unsecured lines of credit have one common theme which in fact limits their ability to solve the question presented. Simply put, they all have limits. Loans of any nature are fixed in dollar availability, and once fully drawn upon, are no longer useful until some portion (or all) is paid back.

To further illustrate, imagine a medical practice has acquired a loan of $50,000. On the first of the month the business needed the full loan value for rent, insurance, payroll, phones, other utilities, and normal monthly expenses. A piece of diagnostic machinery breaks and repair is immediately needed. Payments from Medicare and other carriers are not due for a week. There is no more line available for use until part or all of the line has been returned to the lender. The obvious conclusion....loans will not work because they do not follow the revenue cycle.

The only financial tool that directly follows the revenue cycle is Medical Accounts Receivable (MAR) funding. Simply put, the provider delivers healthcare, and will get paid in no more than 48 hours. The key here is there is no limit or requirement for the first MAR funding to be paid back in order to draw down again, daily, weekly or in any time interval desired. The more receivables generated, the more financing is immediately available for the business...truly a revenue based financing facility.