Healthcare Financing: Medical AR Factoring & ABL
If you bill insurance, your funding options are smaller and more specialized than you'd guess. If you bill businesses, the standard playbook applies.
Healthcare is two different funding worlds inside one industry, and the first question we ask is which side you live on. If your receivable is owed by an insurance company, Medicare, Medicaid, or a managed care plan, you are in medical AR factoring territory, a specialized product. If your receivable is owed by a hospital, a clinic, a distributor, or another business, you are in standard B2B factoring or ABL territory. The product fit, the pricing, and the lender universe are different. Medical AR factoring exists because of one structural fact: insurers will not assign payment to a third party. They have to pay you. So instead of a true assignment, the lender sets up a DACA, a deposit account control agreement, where the account is in your name but the lender has visibility and sweep authority. Advance rates are lower than commercial factoring, typically 65%–75% rather than 85%–90%, because insurance reimbursement is uncertain (the provider often collects 40–60 cents on the dollar of billed charges, and that variability has to be priced in). Pricing runs around 2% per month. The universe of lenders is small. Out of roughly 700 factoring companies in the U.S., only 10–15 actually do medical. That scarcity is exactly why advisors matter here. Healthcare supply companies, home health agencies that bill private pay, medical device distributors, equipment providers. These run on standard commercial AR. The factoring product looks like staffing's: 85%–90% advance, lockbox, scaling line. Equipment financing covers capital purchases (imaging, infusion, mobile units, fleet) on 60–84 month terms at single-digit to low-double-digit rates. Larger healthcare supply businesses with inventory plus AR plus equipment usually graduate to ABL. The right move depends entirely on the receivable mix. We ask first, then recommend.
The cash-flow challenges healthcare & medical practices actually face
- •Insurance reimbursement timing: 30 to 90+ days from claim submission to payment, often longer for disputed claims
- •Reimbursement uncertainty: providers commonly collect 40–60 cents on the dollar of billed charges, which depresses advance rates
- •Medical factoring is a small lender universe (10–15 specialty lenders in the U.S.), making negotiation difficult without an advisor
- •Self-pay and private-pay receivables behave differently than insurance, sometimes financeable separately, sometimes not financeable at all
- •Equipment-heavy practices (imaging, surgical, mobile units) need capital that fits depreciation schedules and tax treatment
- •HIPAA and compliance requirements on lockbox and DACA structures add diligence time on the lender side
- •Practice acquisitions and roll-ups need bridge capital that traditional bank financing won't move fast enough to cover
What usually fits, ranked
Invoice Financing
For medical AR specifically, this is a specialized variant: DACA account instead of true lockbox, advances of 65%–85% set against net collectible value rather than billed charges, around 2% per month pricing. For non-insurance healthcare receivables, the standard commercial structure applies.
Asset-Based Lending
Fits healthcare supply, distribution, and device companies with multiple collateral types: AR plus inventory plus sometimes equipment. Prime + 1–5% pricing once you clear the $3MM facility threshold.
Equipment Leasing & Financing
Imaging, infusion equipment, mobile units, and fleet on 60–84 month terms at single-digit to low-double-digit rates. Sale-leaseback is the standard move to extract equity from equipment you already own.
Working Capital Loans & Lines of Credit
Revenue-based capital for practices where the AR is too small or too self-pay-heavy to factor. Sized at 10%–15% of annual revenue, funded in days.
Subordinated & Unsecured Credit
Bridge and sub-debt for M&A timing gaps in physician group roll-ups and dental support organization (DSO) consolidations. 6–36 month interest-only structures.
How this plays out in practice
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.
Public case study: Total Working Capital, $3.1MM
This medical device manufacturer, headquartered in Central Florida, was referred to Serve Funding by a banker after narrowly missing the bank's debt service coverage ratio requirements.
See full case study →How Michael thinks about healthcare & medical practices
“There's only a handful of companies that do medical receivables factoring because it's trickier. There's probably 700 factors in the US and maybe 10 or 15 of them do medical. That's how specialized it is. Insurances won't do what's called an assignment. They won't pay another third party. They have to pay you directly. So they set up typically what's called a DACA account, the control account where the lender has visibility and sweep, but it's still in your name.”
— Michael Kodinsky, Founder of Serve Funding · Mike explaining medical factoring, the cleanest articulation of why medical AR is its own specialty.
“You'll have an advance rate, obviously, of, could be 65, 70%. It's on the lower side of medical because, as you know, you get paid oftentimes 50 cents on the dollar.”
— Michael Kodinsky, Founder of Serve Funding · Mike on the structural reason medical advance rates run lower than commercial factoring.
“We're here to serve is our mantra. That's kind of a biblical nod to a servant leadership approach that we take to the way we operate.”
— Michael Kodinsky, Founder of Serve Funding · Mike on the philosophy that drives Serve Funding, particularly relevant in healthcare, where the lender universe is small and prospects often arrive frustrated after being shopped to the wrong specialty.
Advance rates and eligibility in healthcare & medical practices
| Facility size | $250K - $25MM |
|---|---|
| Advance rate | 65%-85% 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, because 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 |
What doesn't usually fit (and why)
Half of being useful is being honest about what doesn't work. These are products we generally don't recommend for healthcare & medical practices, and the reason.
PO funding finances inventory production against a hard purchase order from a business buyer. Insurance claims do not work that way. The receivable doesn't exist until the service is rendered.
SBA can fit healthcare practice acquisitions, but it's a 4–12 week underwrite that we usually refer out. For working capital timing in a live practice, faster non-SBA products almost always make more sense.
