Asset-Based Lending for Healthcare Providers
Healthcare asset-based lending advances against third-party payor receivables — insurance, Medicare, Medicaid, managed care — at 65%-75% of net collectible value rather than the 80%-85% common in commercial lending. The gap is not a penalty; it reflects that a healthcare claim is billed at gross charges and collects at a contracted rate, so a $100 charge might net $38, and the lender advances against the $38. As of 2026, facilities run $250K to $25MM, price from Prime plus 2%-6%, and close in 15-30 business days — longer than commercial ABL because payor mix, denial rates, and aging by payor all have to be analyzed. The structural complication is that federal anti-assignment rules bar Medicare and Medicaid from paying a lender directly, so these facilities use a two-account lockbox structure where government payments land in the provider own account and are swept under a deposit account control agreement. Providers should expect a specialized medical funder rather than a generalist ABL lender.
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Where this fits best
Our sweet spot is $5MM to $50MM in revenue on asks between $250K and $5MM. We work meaningfully smaller and meaningfully larger — we have closed $250K factoring lines and $50MM facilities in the same year. What usually decides fit is your credit, your existing debt, and whether the structure works at all. Size is the last thing we look at, not the first.
- •Sweet spot is $5MM-$50MM in annual revenue or net patient service revenue, and two or more years operating — neither is a cutoff
- •Third-party payor receivables — insurance, managed care, Medicare, Medicaid, workers compensation
- •A billing operation that can produce aging by payor and a historical collection rate
- •Denial and adjustment rates you can document rather than estimate
- •No unresolved compliance action, recoupment demand, or payor audit outstanding
What is actually going on
Healthcare receivables confuse every lender who has not specialized in them, and they confuse plenty of providers too. The core of it is that a healthcare invoice does not mean what an invoice means anywhere else. Bill $100 to a commercial plan and you might collect $42. Bill the same service to Medicare and you might collect $31. Bill it to a plan you are out of network with and you might collect $12 after an appeal, or nothing. The balance sheet says receivables. What exists is a probability distribution. That is why advance rates land at 65%-75% instead of 85%, and why the analysis takes longer. A funder is calculating more than whether the payor will pay. It works out what proportion of billed charges historically converts to cash, at what speed, by payor, and reserves for denials, adjustments and recoupment. A practice with clean payor-level collection data gets a better advance rate than one without, purely because the uncertainty is smaller. The second complication is legal rather than financial. Federal law restricts assignment of Medicare and Medicaid claims, which means government payments cannot be directed to a lender lockbox the way a commercial receivable can. The workaround is a two-account structure: government payments land in an account in the provider name, controlled through a deposit account control agreement, and are swept from there. The structure is well established, and it is one of several reasons this financing goes to specialized medical funders rather than generalist ABL lenders. What providers gain for the extra complexity is a facility that solves an actual structural problem. Payroll for clinical staff runs biweekly. Payors pay in 30 to 90 days, sometimes longer after a denial and appeal cycle. Growth in patient volume increases the receivable balance and the payroll before it increases cash. A facility sized to receivables rather than to earnings closes that gap without asking a practice to be profitable on a trailing basis first.
How it works
Analyze payor mix and net collection rate
Aging by payor, historical gross-to-net conversion, denial rate, and days in AR. This is the substance of the underwrite. Commercial-heavy books get better advance rates than Medicaid-heavy books, and documented history beats estimates every time.
Set the advance rate off net collectible value
65%-75% of expected net collections, not of billed charges. Modeling this first is what keeps the process from ending in disappointment three weeks in.
Build the lockbox structure
Commercial payors can be directed to a lockbox. Medicare and Medicaid cannot be assigned, so those payments flow into a provider-name account governed by a deposit account control agreement and are swept from there. Your bank will need to participate.
Close in 15-30 business days
Longer than a commercial ABL because of the payor analysis and the account structure. Facilities from $250K to $25MM, priced from Prime plus 2%-6% depending on payor mix and collection history.
Report monthly and reprice as the book improves
Aging by payor and a borrowing base certificate each month. A year of improving collection rates is a real argument for a better advance rate, and specialized funders do respond to it.
Terms, costs and timelines
| Facility size | $250K - $25MM |
|---|---|
| Advance rate | 65%-75% of net collectible value — not of billed charges |
| Pricing (2026) | Prime + 2%-6%, depending on payor mix and collection history |
| Time to close | 15-30 business days |
| Payors financed | Commercial insurance, managed care, Medicare, Medicaid, workers compensation |
| Government payor structure | Two-account lockbox with a deposit account control agreement — direct assignment is barred |
| Key underwriting inputs | Aging by payor, gross-to-net collection rate, denial rate, days in AR |
| Common exclusions | Self-pay balances, claims past 120-180 days, amounts under audit or recoupment |
| Lender type | Specialized medical funders, not generalist ABL lenders |
| Serve fee | A success fee, earned only on closing. Agreed in writing before you sign anything. No retainers, no upfront costs |
A medical receivables facility vs. what gets pitched to practices
| A revenue-based advance against card and deposit volume | A medical receivables facility | |
|---|---|---|
| What is underwritten | Trailing bank deposits | Payor mix, net collection rate, and aging by payor |
| How much is available | Roughly 10%-15% of annual revenue, fixed | 65%-75% of net collectible receivables, recalculated monthly |
| Repayment | Daily or weekly ACH, independent of when payors pay | Self-liquidating as claims adjudicate and pay |
| Cost | Factor rates that annualize well past 50% | Prime + 2%-6% |
| Handling of denials | Irrelevant to the lender — the draw continues regardless | Reserved for in the borrowing base, so availability tracks reality |
| Intermediary compensation | Built into the factor rate rather than quoted separately, so you rarely see it | A success fee, agreed in writing before you sign and earned only if you close |
How this plays out, with numbers
A multi-site specialty practice with about $16MM in net patient service revenue is carrying $4.8MM in gross receivables and financing a biweekly clinical payroll of roughly $420K out of a fully drawn bank line. Payor mix runs about 58% commercial, 27% Medicare, 11% Medicaid, and 4% self-pay. The gross number is not the working number. Historical gross-to-net conversion on this book is about 41%, so $4.8MM in billed charges represents roughly $1.97MM of expected net collections. Removing self-pay balances and claims past 150 days leaves about $1.72MM eligible. At a 71% advance rate — supported by a documented denial rate under 6% and clean payor-level reporting — the facility sizes to roughly $1.22MM. Structure: commercial payors directed to a lockbox, Medicare and Medicaid flowing into a practice-name account under a deposit account control agreement and swept daily. Priced at Prime plus 4.25%, closed in 24 business days. The practice stops timing payroll against deposit timing, and the reporting discipline the facility requires surfaces a denial pattern with one managed care plan that had been quietly costing more than the financing does.
A representative structure, sized to a typical file. Details are generalized — we do not publish client specifics.
When this is the wrong answer
Half of being useful is being clear about what does not work. If one of these describes you, the honest path is below — and it may not run through us.
A pending recoupment is a claim ahead of the lender on the same receivables, so lenders will wait it out. Resolve or quantify the exposure first: a documented settlement is financeable, an open audit of unknown scope generally is not. Tell us early rather than letting diligence find it, and we will tell you what the file needs to look like when it is time.
There is no payor receivable to advance against. A working capital loan or equipment financing usually fits better, and both move faster.
The advance rate is derived from your historical net collection rate. Without that data a funder either declines or prices for the worst case. Twelve months of clean payor-level reporting is worth more to your cost of capital than any negotiation.
Nobody lends against billed charges. Model the borrowing base off expected net collections and the numbers stop being a surprise. We will run that calculation before you commit to diligence.
