Avoiding Common Traps That Lead to Distress

The Turnaround Management Association posted an excellent article on its website, Managing to Avoid Failure; Avoiding Common Traps That Lead to Distress by Tyrone Courtman and Andres Wild, both of Cooper Parry LLP.

The article discusses that both external issues and internal issues lead to business distress and, all too frequently, to outright failure of the business. Internal issues include: complaceny, lack of objectivity in analyzing the business, not allocating time for thinking/planning, lack of strategic planning, lack of communication with employees and not providing appropriate motivation for employees. External issues are many and include cutthroat competition, harsh economic conditions, high cost of borrowing, and even the inability to obtain investments required for the business. Indeed more firms fail when market liquidity falls.

In times of low liquidity businesses must expand their thinking and explore alternative sources of financing. Accounts Receivable Funding can be an effective financing source for businesses in the healthcare, commercial and government industries during periods of low liquidity.

Demand for Beds Fueling Hospital Construction

$41 billion dollars worth of new hospital and clinics were under construction during the fourth quarter of 2007. According to the article in H&HN Magazine, the driving force for this construction spree is the demand for beds. New technology and new equipment [i.e. imaging rooms, etc.] are contributing, but the addition of beds is what is keeping the pace of hospital construction going. And the pace is continuing in spite of the credit crunch in the financial markets and in spite of the reimbursement issues from Medicare and Medicaid that hospitals are facing.

How will they pay for this? Adding Medical Accounts Receivable (MAR) funding to their financial strategy is an additional financial tool that healthcare executives can take advantage of. By transforming a non-performing asset, the hopsital's receivables, into cash through a purchase and sale of that asset, medical accounts receivable funding is not just a financial solution for a hospital in fiscal stress. The immediate cash infusion and the ability to plan for a consistent cash flow makes MAR funding a financial strategy for growth and expansion as well....and one who's cost and availability is not subject to the fluctuations of the financial market since it is debt-free.

Hospitals Are Grading Their Sources For Payment Of Medical Receivables

Hospitals have given insurance companies a dose of their own medicine. A survey was conducted to determine how insurance companies rated in the services they provide to their clients.

Soon to be released, the survey found some national insurers have poor image problems.

Several of the nation's five largest insurers had more high negative approval ratings than positive ones. UnitedHealth Group, Inc., who has contracts with 96% of the hospitals responding to the survey, was hit with the worst ratings.

The insurer received an "unfavorable" opinion from 91% of the hospital executives who responded. The remaining 8% gave it a "favorable" rating.

Blue Cross of California, was second-worst with 48% unfavorable. Aetna got the best score with 57% favorable and 37% unfavorable.

The results of the survey were based on interviews with 113 executives representing more than 500 hospitals, which represents 10% of all U.S. hospitals.

These findings could help consumers shop for future coverage and serve as a wake-up call for the employers that purchase these services.

Receivables Financing A Proven Successful Funding Tool

Receivables financing provides well in excess of $200 billion of improved cash flow to industries each year. It has been used for decades by multi-billion-dollar Fortune 500 companies such as IBM, Georgia Pacific, Scott Paper, Honeywell, and Shell Oil.

Now, this proven, debt-free, and flexible method of effectively multiplying your working capital is also available to medical providers.

Medical Accounts Receivable (MAR) Funding:

• Offers immediate and dependable access to unlimited working capital


• Quickly strengthens your financial statements and credit rating


• Makes it possible for you to obtain cash discounts for early payment of your suppliers (accounts payable or any other debt)


• Increases your purchasing power and provides cash for marketing, expansion, and new equipment or medical procedures


• Can enable you to meet payroll, pay your taxes on time, and eliminate the need to file bankruptcy

Widely accepted as an alternative financing source, medical accounts receivable funding is used in the healthcare industry by providers/suppliers that need immediate cash-either for growth or for survival- and may or may not qualify for traditional loans or grants.

With medical accounts receivable funding, claims for medical services can be converted into immediate cash to better manage and expand business and medical practices. Some of the more common industries that rely on medical accounts receivable funding to maintain a steady flow of cash include:

• Acute hospitals
• LTAC hospitals
• Rehab hospitals
• Specialty hospitals
• Physician groups
• Surgery centers
• Imaging centers
• Dialysis centers
• Emergency transportation providers
• Nursing homes
• Home health care
• Medical labs
• DME/HME
• Rehab centers
• Oral surgeons
• Urgent care centers
• Pharmacies

Lessons Learned From The Turbulent Financial Market

In the March 17, 2008 issue of HealthLeaders Media, the authors discuss the current credit storm and how it affects the healthcare market. Over the past weeks, much has been written and read about the turbulence in the financial markets. These authors, Peter Bruton, Scott B. Clay and Deborah Kolb-Collier, however go on to draw some interesting conclusions and make some timely recommendations for hospital executives for dealing with the financial markets in the future.

They note that hospitals and hospital systems should consider the following lessons learned from this volatile marketplace:

1. Hospitals should be planning how they can absorb the greater-than-anticipated cost of financing. Incorporating assumptions about tighter debt markets and volatile interest rates will be a critical part of financial and capital planning

2. Due to skepticism about the value of insurance, the market is likely to be more focused on the underlying credit of the borrower

3. Recent experience points to the value of diversifying financing sources. Putting too much of the organization's financial capability in a single financing vehicle can unduly increase risk in today's market

There is a financial tool that addresses these points. A Medical Accounts Receivable (MAR) funding program from Sun Capital HealthCare, Inc. provides a cash flow solution for providers that:

a. does not depend on the volatility of the credit markets since it is not a loan or credit instrument but rather a purchase and sale of an asset

b. allows a financial executive to effectively plan a consistent cash flow and to plan and control their costs of financing

c. is an additional funding tool for the healthcare executive that can be utilized quickly [funds are available within 24-48 hours of submission of claims]. The Sun Capital MAR funding program provides the flexibility that financial executives need to utilize all the financial tools at their disposal, thereby reducing the risk of putting all of a provider's financial capability in a single financing vehicle

Now more than ever, it is increasingly important that healthcare executives take advantage of the full range of financing and funding tools available.

New Online Search Tool Available To Access Health Data

Companies are marching forward to create online search engines for healthcare coverage and medical accounts receivables billings will soon follow this path.

http://blogs.wsj.com/health/files/2008/03/ss_map.jpg

This online push is also related to a larger effort promoted by the federal government to get doctors and hospitals to abandon their paper medical files in favor of electronic records-keeping systems. Health providers have been slow to make such changes, in part due to costs and shortcomings in the technology.

The company is rolling out a search service that takes into account a member’s personal health information, including past diagnoses and health-plan details.

So if your record shows you suffer from sinusitis, a symptom search for “headache” in the so-called SmartSource system, accessed through Aetna’s member Web site, would tend to favor sinus pain over brain tumors. While reading about sinusitis, clicking on a “Doctors” tab would pull up ear-nose-throat docs in your network and near your zip code.

Clicking a “Medications” tab shows drugs used to treat the condition. Another tab lists discounts, disease-management programs and other particulars available under the user’s plan. Provider-specific pricing information should be coming soon. “We’ve got it; we should be able to display it,” John Bahl, head of online product design for the company’s e-health department, told Health Blog.

A key component of the service is a computerized brain from Healthline Networks Inc., which parses searches and connects terms for symptoms, diagnoses and treatments together, as well as articles and additional information.

A visual map (click on image above) lets consumers see how various terms and concepts connect. Privacy may prove to be a catch: Many patients aren’t keen on giving their insurer too much additional information. Aetna says it follows HIPAA and safeguards patient data rigorously, and won’t consider the information members provide for claims or pricing decisions. Healthline says it doesn’t hold on to personal health information after searches are complete, and never knows the searcher’s identity.

One benefit Aetna sees from such a system: Tools and advice already on its Web site, but hard to find, can be set to show up when they’re most appropriate to a particular member.

Aetna’s own employees have been the guinea pigs for the past six weeks or so. This year, the company plans to roll the service out to 25 companies and perhaps 2 million people, starting this spring. Not all employers using Aetna subscribe to the personal health-record feature, but the insurer plans to make SmartSource available to their employees eventually anyway, though it won’t be quite so personalized.

Sun Capital HealthCare, Inc. Selected as a Solution Provider for the National Healthcare CFO Summit

Sun Capital HealthCare, Inc. (SCH) will serve as a solution provider at the National Healthcare CFO Summit on April 13-15, 2008 in Ponte Vedra Beach, Florida.

In their role as a solution provider, SCH will have senior executives on hand to meet one-on-one with hospital and healthcare system CEO's, CFO's, and VP's of Finance for pre-scheduled consultations regarding financial strategies and solutions specifically for the healthcare industry.

Those scheduled for a private meeting with SCH will learn about how SCH's Medical Accounts Receivable (MAR) funding program can provide immediate working capital and address the cash-flow problems faced by the healthcare industry today.

Along with the private one-on-one meetings, the event offers keynote presenters, interactive workshops and informal networking functions.

More Commentary on the Credit Crunch

The "This Week in Healthcare" column in the March 3, 2008 issue of "Modern Healthcare" continues the discussion as to how hospitals are searching for exit strategies to escape from the credit markets. A Vice President of Ponder & Co., Michael Tym, referring to the bond market, is quoted as saying "We have a belief that the market is broken, and not going to be viable."

Various refinancing plans to deal with the credit crunch and resulting rise in interest costs of the auction-rate debt market are discussed, but they basically all entail exchanging one form of borrowing for another form in the search to lower the soaring interest costs resulting from the bond market insurers exposure to the subprime market.

This article, like so many others describing the search for financing strategies to deal with the liquidity crunch, fails to look at a debt-free funding strategy that is readily available to healthcare executives. Hospitals and healthcare networks are carrying on their balance sheets a non-performing asset that is not generating any return. Through a medical accounts receivable [MAR] funding program from Sun Capital HealthCare Inc., hospitals can turn their receivables into cash that can go to work for the provider rather than sit on the books collecting dust. Because of reimbursement delays, the providers cash flow is often an obstacle to growth and profitability. But with a MAR funding program, hospital executives can be funded within 24-48 hours of the submission of claims. The cash can then be put to work. Since MAR funding is not a loan, the availability of funds and the cost of funds is not tied to the credit market, so healthcare executives can plan their financial strategies with a predictable cash flow.

Asset-Based Loans - Not The Best Solution to Provide Medical Cash Flow

Financial products have specific characteristics that make them appropriate for some situations and inappropriate for others. To date, there is no "one size fits all" cash flow solution product. The medical community poses cash flow challenges that require a flexible, growth oriented financial product designed to meet the ever-changing needs of medical providers.

To find the most complete cash flow solution for medical providers we must first identify the characteristics associated with the healthcare industry. To begin, we know that insurance companies both private and governmental pay their claims long after the patient's date of service. The reasons for this are many but these are just a few:

• errors on claim forms (patient data, provider information, diagnostic and/or procedure codes)
• requests for supplemental reports, x-rays, or notes
• the "float" on funds

These all point to the first payment characteristic, "slow." As we see from the list above the probabilities for errors are numerous which leads us to the second characteristic of healthcare insurance payments which is "inconsistent." It usually works out that the provider doesn't know when they will be paid, nor do they know how much they will get once a payment comes in. The reason for this can be found once again in the characteristics listed above. All of these errors or additional required information take different periods of time to correct or provide. Given that these happen randomly, we now can see the reason for the slow, inconsistent payments.

A third characteristic of the healthcare industry is that normal overhead is a regular occurence. Rent, utilities, salaries and the like must be paid on a regular basis, a characteristic diametrically opposed to the irregular cash flow providers receive. The aforementioned characteristics of "slow" /"inconsistent" payments combined with regularly occurring expenses puts the healthcare industry in its current state, "critical."

Enter the Asset-based Lender. Asset-based lending is the most common form of financing found in the healthcare arena, yet the industry remains on the critical list. One is then presented with the following question: If most medical providers have the use of an asset-based funding line, then why is there still a huge problem in the industry? The only conclusion one can reach is that ABL (asset-based lending) funding lines do not meet the needs of the medical community. How do they work and where are the flaws?

The bank requires certain data from the hospital that provides the bank with necessary information. The most important piece is the average monthly accounts receivable balance. This "photograph" of the monthly A/R provides the bank with the basis for its loan. The loan is a finite amount and is secured primarily by the provider's monthly A/R. As previously discussed, overhead is a constant but cash flow is not. The usual scenario occurs when the medical facility has very quickly used its entire funding line and the lender will not disburse any more funds until some of the invoices start paying. Once again the medical provider is waiting for bills to pay in order to get its needed funds. A finite line of credit is a cash flow dependent form of funding in that the availability of funds is fully dependent of payments received reducing accounts receivable. Unfortunately, the overhead doesn't wait for revenue, therefore this funding source is inadequate for the medical industry.

The obvious solution would be a funding strategy which would be "service" dependent where the funding occurs once the service is completed. Enter Medical Accounts Receivable (MAR) Funder. MAR Funding is the best form of funding for the medical community. Look at its characteristics: Once the service is performed, the client (medical provider) receives its funding; Immediate cash flow for immediate overhead needs coming from a slow cash flow source; Consistent cash flow derived from an inconsistent cash flow source. This is the perfect solution to a complicated problem.

Asset-based lines are not competitive products to MAR Funding. They are significantly different. Asset-based lines are very effective when used to provide a single cash infusion focused on an expansion campaign, additional equipment or another one time funding. Cash flow can only be provided by a service dependent source, and to date MAR Funding is the only thing available for the healthcare industry.

Hospital Operating "in the Black" Suffers From Lack of Cash Flow

According to a recent KPMG audit, Bert Fish Medical Center may have operated in the black in 2007, but lack of cash flow still put a squeeze on the hospital's bottom line.

While activity was up, resulting in almost a $3.4 million increase in revenues, according to Chief Financial Officer Al Allred, accounts receivable - the amount the hospital is owed- was also up.

This good-news, bad-news report received a mixed reaction from hospital board member Bill McGee, chairman of the finance committee. "I am pleased we are operating in the black, but I am not pleased we are not doing better than we are," he said.

McGee would like to see new revenue generators, such as adding a wound care center to the hospital. He also hopes to hire more new doctors who will build up their patient base in order to boost numbers.

An effective financial strategy to fund McGee's propositions is Medical Accounts Receivable (MAR) Funding. By selling their accounts receivables from third party payors to a credible funding source, Bert Fish Medical Center will have the immediate and debt-free working capital needed to expand their facility and to attract doctors to join their team by having the financial freedom to keep up with the competitive salary market.

The Bubble Has Burst, The Downturn Is Here

The country's Turnaround Management Association has hundreds of dedicated, well-trained Certified Turnaround Professionals who are dedicated to corporate renewal and helping distressed companies return to a healthy economic footing. In a recent article, Mr. J. Scott Victor, Senior Managing Director, Special Situations Group, National City Capital Markets presents a compelling case describing that the liquidity bubble has burst and an economic downturn is indeed here.

As the liquidity crunch tightens, many businesses will need Certified Turnaround Professionals to help guide them through the difficult times ahead. Major restructuring may be needed and financial restructuring is often a major part of the process. Unfortunately, many forms of working capital acquistion become limited during an economic downturn. Companies like Sun Capital HealthCare, Inc., Boca Raton, Florida, offer an alternative form of working capital called Medical Accounts Receivable Funding.

Ingenix Investigation

NY Attorney General investigates health insurers' fraud scheme.

The continuing investigation has revealed that Ingenix operates a defective and manipulated database that most major health insurance companies use to set reimbursement rates for out-of-network medical expenses.

The investigation also found that two subsidiaries of UnitedHealth Group—Ingenix's parent company—under-reimbursed their members for out-of-network medical expenses by using data provided by Ingenix.

This investigation will be one to watch. The outcome of these accusations may certainly affect the calculation and repayment of future medical claims.

Three Rx's

For the living organism, the lack of sufficient oxygen prevents growth and absence of it threatens survival. Metaphorically this is important because capital is business oxygen. Insufficient capital prevents growth and development and capital absence dooms business to failure. The metaphor ends there, because oxygen is readily available and accessible to the living organism. Capital, on the other hand, must be acquired.

Obviously, a business requires working capital to fund manufacturing, supplies, overhead and general day to day functioning. "Growth" capital is required to finance development of the business whether the plan is to increase the number of accounts, add additional products or purchase new equipment. Regardless of the reason or need, there are only three prescriptions (Rx) to satisfy your capital requirements: raise equity, acquire debt or sell assets.

Equity financing involves the sale of ownership to outsiders willing to invest in the business. Debt financing is the second Rx. To obtain debt, you are selling your businesses and/or your personal creditworthiness. The lender calculates both business and your creditworthiness which determines whether the loan is made, and the cost (interest rate) of the loan. Rx three is selling assets to raise capital. This is a less traditional, but equally effective method of raising capital. Some conclude, incorrectly, that this method requires selling hard assets such as equipment or furniture. Fortunately, that is not required. The only asset that a company can sell and still remain in business is accounts receivable.

Medical Accounts Receivable (MAR) funding uses the laziest asset owned by a medical practitioner. Becoming aware of such utility can bolster a medical practice or medical services business to new growth and profitability.

"This Is Gonna Cost You"

A timely title in the March 3 issue of the HealthLeaders Financial E-newsletter. Everywhere you read about the business of healthcare, the lament is the same. The liquidity crunch hitting the financial markets is driving up interest costs on debt for hospitals across the country. especially those using auction-rate debt. Furthermore, as one CFO is quoted in the article, "...it is taking over all the time of the accountants, investment bankers and CFO's."

Perhaps moreso now than at any other time previously, today's healthcare financial executives need to find additional resources to meet their financial needs - without going into more debt. A solution: accelerate your cash flow and generate more working capital from your operations. However, reimbursement delays compound the problem so that your cash flow is often an obstacle to profitability rather than a source of working capital.

There is a funding tool that does provide a cash flow solution to your working capital needs. Add Sun Capital HealthCare Inc.'s Medical Accounts Receivable [MAR]Funding program to your fiscal strategies and your cash flow becomes a solution rather than a problem. By selling your receivables, you can have cash within 24-48 hours of submission. Instead of sitting on your balance sheet and not yielding any return, Sun Capital's MAR funding program, specifically designed for and exclusively offered to healthcare executives, can help overcome both the liquidity crunch and the reimbursement delays.

New Bill Proposes $500,000 Surety Bond Rule

In an effort to deter fraud and abuse, the Senate has proposed a bill that if enacted would impose a $500,000 surety bond requirement on DME/HME providers.

"It's really out of proportion, because your everyday provider doesn't pose that big a risk to the Medicare program," said industry attorney Asela Cuervo.

In recent years, Congress has passed a law requiring a $50,000 surety bond, but it was never implemented. The industry has argued that even a $50,000 surety bond rule would put some legitimate HME providers out of business, let alone $500,000.

To meet this latest requirement, a provider would have to come up with $10,000 to $20,000 to post a bond and then put up collateral to back it up, according to estimates.

In response to the overwhelming outcry from the industry, government officials have decided to reconsider the measure.

Securing Debt Financing a Challenge for Healthcare Providers

The cover story in the February 25th issue of Modern Healthcare describes the difficulty many hospitals, nursing homes and other healthcare providers are having in securing debt financing for their institutions. The basic problem is that the subprime mortgage market turmoil has made most lenders very cautious in providing debt financing at all, and if it is available, the interest rates being charged have jumped to the point that healthcare providers just cannot afford the steep fees. This has affected even very large, well-established health systems such as Multicare Health System, Christus Health and SSM Health Care. It has not been unusual for interest rates to increase from 3.9% to 15%, and even 20%. Many health care providers are unwilling to sign-up for long-term debt at these rates. Therefore, many healthcare providers are looking for short-term financing vehicles to use while the interest rates for debt settle down to more favorable long-term rates. While this type of short-term financing has been difficult to find, a well-established firm in Boca Raton, FL, Sun Capital HealthCare, Inc. does provide a good solution.

Sun Capital HealthCare, Inc. is a premier funding source for healthcare providers. They provide a cash-infusion by purchasing accounts receivable backed by third party payors. They are a very stable, reliable and ethical firm with more than twelve years of experience within the industry. During that time, they have purchased almost $4 billion in accounts receivable. They are frequently called on to help healthcare providers that have a cash-flow problem, or need funds for expansion, but chose to not add debt to their balance sheet.

Their Medical Accounts Receivable Funding solution can provide the working capital healthcare providers need without a lengthy contract, thereby providing a financial "bridge" until the more traditional lending sources become available again at a reasonable fee. They have the ability to move quickly to provide working capital so that healthcare providers do not have to sign long-term contracts for debt financing at today's extremely high rates.

Hospitals Hit Hard By Bond Market

According to a recent article in the Minnesota Star Tribune, two major Minnesota hospitals are facing a serious financial situation. The weekly interest payments on their outstanding debt are soaring, putting them in a credit squeeze. This is attributed to investors moving away from bonds backed by insurers who face substantial exposure resulting from the subprime mortgage market. Consequently, some bonds aren't being bought and other deals are being done only at higher interest rates.

This growing trend puts more pressure on CFO's to refinance their debt and add other financing methods to their fiscal strategies. One such tool is medical accounts receivable funding. It utilizes a non-performing asset, a healthcare provider's accounts receivable, to generate debt-free working capital. Since the costs of this funding program do not fluctuate with interest rates, healthcare executives can plan their financial strategies based on a predictable cash flow.

Medical Accounts Receivable (MAR) Funding As a Working Line Of Credit

MAR Funding can be used as a "reserve working capital line," for medical providers. The flexibility inherent in this kind of finance allows providers to use their third party insurance claims (already billed and awaiting payment) to fund daily needs as they occur. Funds for such use can literally be placed in the provider's account and can be available for use within 48 hours of such deposits.

Many medical providers experience "highs" and "lows" in cash flow as a result of insurance and governmental payors protracting payments for a litany of reasons. Paying for supplies, payroll and other daily operational expenses found in medical practices can be easily accomplished by opening an account with a MAR Funding company, specifically Sun Capital HealthCare, Inc. Not all financial institutions offer the ability to use their MAR Funding as a working line of credit. Providers must consider the flexibility offered by the funding source chosen. The ability to pick and choose when and what to finance can reduce costs of funding and allows the provider to "customize" their funding solutions.

Financially Troubled Hospital Can't Afford to Improve

Kenneth Hall Regional Hospital has lost an average of $3 million per year for the past 5 years, according to a recent article in the St. Louis Post.

When hospitals struggle financially, a downward spiral frequently occurs. Financial losses make it difficult to upgrade technology and keep the hospital looking attractive. This, in turn, makes it hard to attract physicians and their patients; a circumstance Kenneth Hospital knows all too well.

Kenneth Hospital is a 161 bed facility, but on an average day only about a quarter of those beds are filled. In 2006, federal health inspectors found that the hospital's on-call trauma surgeons failed to respond within the mandated 30-minute time frame.

Mike McManus, COO for the foundation which owns Kenneth Hospital, blames inadequate finances for the hospital's decline in treatment. "We acknowledge that some of our results are not where they should be, but our hospitals do not have cash reserves. What's happened in the past basically is we've repaired things when they break, but we don't have the resources to improve."

McMannus sees a merger of services with its other facility, Touchette Regional Hospital, as only a short term solution for both hospitals' chance of survival.

Hospitals finding themselves in a similar financial crisis should strongly consider Medical Accounts Receivable (MAR) Funding as a solution. MAR Funding is a strategic way to generate working capital. With MAR Funding, a hospital's account receivables can be converted to cash to keep up with ever-changing medical technology, purchase new equipment, invest in additional personnel, and ensure a hospital's financial survival.

Medical Accounts Receivable Funding Glossary

Many healthcare businesses have started to become familiar with the advantages of Medical Accounts Receivable (MAR) Funding over the past few years. With a new financial tool comes new vocabulary to become familiar with as well. By understanding the terminology used in the MAR Funding industry, you can gain a better understanding of how this financial tool works and how it can benefit your healthcare company.

Advance Rate: The percentage of the factored invoice advanced to a client upon initial invoice funding. The advance rate is typically expressed as a percentage of the total invoice amount. Advance Rates usually range from 70-80%.

Discount Fee: This is the fee charged by the funding company for performing funding services. Discount fees are typically time-sensitive and are usually a flat, fixed percentage of the total invoice. This fee can be calculated on a daily basis or in 15 or 30-day increments.

Due Diligence: The background check and research conducted by the funder to assess the validity of a prospective client (and that client’s customers) before officially entering into a funding agreement. Due diligence generally involves credit checks, appraisals, UCC searches, lien searches and/or on-site visit with clients.

Medical Account Receivable (MAR) Funding: Medical accounts receivable funding is the sale and purchase of an asset at a discount. There is no debt incurred on the client's balance sheet, and the net result of each transaction will be the conversion of the client's accounts receivable into cash.

Payor: The person, company, or government responsible for making payments on an income stream.

Reserve: An amount withheld by the funder net of the advance. Can be used as a financial cushion to offset against payment shortages, client and the customer disputes, or bad debt losses due to non-payment. The reserve should be released to the client after the customer has paid the funder the total money due on the invoice.

Reserve Release: The process of the funder releasing final monies due the client once the invoice has been totally satisfied less any applicable fees or charge-backs.

Working Capital: In general, the funds needed by a business to pay current expenses such as payroll, benefits, rent and other operating costs.