Invoice Finance For The Healthcare Industry

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ABC FinanceInvoice financeInvoice Finance for the Healthcare Industry
Gary Hemming

Author: Gary Hemming CeMAP CeFA CeFA CSP

20+ years experience in invoice finance

Welcome to the world of invoice finance, a product that’s becoming increasingly relevant in the healthcare industry.

Invoice finance allows healthcare businesses to improve their cash flow by offering upfront payment on invoices. Read our guide to find out how it works, or compare online to find out how much you could borrow.

In the healthcare industry, managing cash flow can feel like walking a tightrope. With the NHS and other large organisations often taking their time to pay invoices, healthcare companies can find themselves in a cash crunch.

In this guide, we’ll run through the key issues surrounding invoice finance for the healthcare industry.

What is Healthcare Invoice Finance?

So, what exactly is healthcare invoice finance? Well, it’s a type of asset finance that allows healthcare companies to unlock the cash tied up in their unpaid invoices. Instead of waiting for customers to pay, businesses can sell their invoices to a finance facility, receiving an advance of up to 90% of the invoice value. The remaining balance, minus a small fee, is then paid once the customer settles the invoice.

Healthcare invoice finance can be a game-changer for businesses in the care sector. It provides a steady flow of cash, helping to smooth out cash flow fluctuations and keep the business running smoothly. Whether it’s paying staff wages, investing in new equipment, or expanding the business, having access to immediate funds can make all the difference.

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Types of Finance for the Healthcare and Care Sector

Now, let’s delve a little deeper into the different types of finance available for the healthcare and care sector. There’s a whole smorgasbord of options out there, each with its own benefits and considerations. From business loans to commercial property finance, there’s a solution to suit every business’s needs. But for now, let’s focus on one of the most popular options: invoice factoring.

Invoice Factoring

Invoice factoring is a type of invoice finance that involves selling your unpaid invoices to a factoring company. It’s a simple and effective way to improve cash flow, providing immediate access to the funds tied up in your accounts receivable.

Here’s how it works. Once you’ve provided a service to a customer and issued an invoice, you can sell this invoice to a factoring company. They’ll advance you a large portion of the invoice value, typically around 80-90%. Then, they’ll take over the credit control, chasing up the customer for payment. Once the customer pays, the factoring company will pay you the remaining balance, minus their fee.

But what makes it so beneficial for healthcare businesses? Well, it’s all about the cash flow. With invoice factoring, you don’t have to wait for customers to pay their invoices. You can get the cash you need right away, helping to keep your business running smoothly. Plus, with the factoring company handling credit control, you can focus on what you do best: providing top-notch healthcare services.

Invoice Discounting

Let’s now turn our attention to another form of invoice finance that’s making waves in the healthcare sector: invoice discounting. This financial tool is a close cousin of factoring, but with a few key differences.

Invoice discounting is a way for businesses to borrow money against the amounts due from their customers. Unlike factoring, with invoice discounting, the business retains control of its own sales ledger and continues to collect payments from its customers. The finance facility provides an advance on the invoice value, typically around 80-90%, and the remaining balance, minus a fee, is paid once the customer settles the invoice.

So, why might healthcare businesses choose invoice discounting? Well, it’s all about maintaining customer relationships and control. With invoice discounting, your customers are none the wiser about your financial arrangements, as you continue to handle your own credit control. It’s a discreet way to boost your cash flow without disrupting your customer relationships.

How Healthcare Invoice Finance Works

Now that we’ve covered the basics of invoice finance, let’s dive into the nitty-gritty of how it works. The process is surprisingly straightforward, designed to get cash into your business as quickly and smoothly as possible.

  1. Issue an invoice: Once you’ve provided a service to a customer, you issue an invoice as usual. This invoice is then sent to both your customer and your finance provider.
  2. Receive an advance: Your finance provider will review the invoice and advance you a large portion of its value, typically around 80-90%. This cash is usually in your account within 24 hours.
  3. Customer payment: Your customer pays the invoice according to your agreed terms. With invoice factoring, they pay directly to the finance provider. With invoice discounting, they pay you, and you pass the payment onto the finance provider.
  4. Receive the balance: Once the customer has paid the invoice, you’ll receive the remaining balance from the finance provider, minus their fee.
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Domiciliary Healthcare Finance

Domiciliary care, or home care, is a vital part of the healthcare sector. However, these businesses face unique financial challenges. From managing staff wages to covering the costs of travel and equipment, maintaining a steady cash flow can be a juggling act.

That’s where invoice finance comes in. By providing immediate access to the funds tied up in unpaid invoices, invoice finance can help domiciliary care businesses manage their cash flow more effectively. Whether it’s covering day-to-day expenses or investing in growth, invoice finance can provide the financial stability these businesses need to thrive.

What are the advantages of invoice financing for businesses in the healthcare sector?

So, why should healthcare businesses consider invoice financing? Well, there are a host of benefits that make it an attractive option:

  • Improved cash flow: By providing immediate access to the cash tied up in unpaid invoices, invoice financing can help smooth out cash flow fluctuations, ensuring you have the funds you need when you need them.
  • Managed credit control: With factoring, the finance provider takes over credit control, chasing up customers for payment. This can free up valuable time and resources, allowing you to focus on your core business.
  • Potential for growth: With a steady cash flow, businesses can invest in growth opportunities, whether that’s expanding services, hiring more staff, or investing in new equipment.
  • Flexibility: Invoice finance is a flexible form of finance that grows with your business. The more invoices you issue, the more cash you can access.

So, whether you’re a small care home looking to expand or a large healthcare company needing to manage cash flow, invoice financing could be the financial solution you’ve been searching for. It’s a tool that’s already helping countless businesses in the healthcare sector to thrive, and it could do the same for you.

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What are the disadvantages of financing an invoice book for healthcare companies?

But let’s not sugarcoat things. While healthcare factoring can offer a host of benefits, it’s not without its potential drawbacks:

  • Fees: Like any form of finance, invoice financing comes with fees. These can vary depending on the provider and the specifics of your arrangement, so it’s important to understand these costs upfront.
  • Dependence on customer payment habits: With invoice funding, your cash flow is tied to your customers’ payment habits. If your customers are slow to pay, it could impact your cash flow. This is a particular problem for medical companies, and other industries whose working capital is impacted by delayed payment terms.
  • Potential impact on customer relationships: If you opt for invoice factoring, your customers will be dealing directly with your finance provider for payment. This could potentially impact your customer relationships based on the fact that the funder will be strict on credit control and have little wriggle room based on a strong working relationship with a particular customer.

Is it a good idea to finance invoice payments?

Well, like any financial decision, it depends on your specific circumstances and your capital requirements. If you’re struggling with cash flow due to slow-paying customers, it could be a lifeline. It can provide immediate access to cash, helping to smooth out cash flow fluctuations and keep your business running smoothly.

However, it’s important to weigh up the potential rates and costs, and consider the impact on your customer relationships. As always, it’s a good idea to seek advice from a financial specialist before making a decision.

Healthcare Invoice Finance


What are the key considerations when using invoice financing in the healthcare sector?

If you’re considering invoice financing for your healthcare business, there are a few key factors to consider:

  • Your cash flow needs: Invoice financing can be a great solution for businesses with cash flow challenges. If you often find yourself waiting for customers to pay their invoices, invoice financing could provide the capital boost that’s required to grow.
  • Customer payment habits: If your customers are typically slow to pay, invoice financing could help. However, keep in mind that your cash flow will still be tied to your customers’ payment habits.
  • The cost of financing: Be sure to understand the costs involved in invoice financing, including any fees or interest rate charges. These costs should be weighed against the benefits of improved cash flow.
  • Your customer relationships: If you opt for invoice factoring, your customers will be dealing directly with your finance provider for payment. Consider how this might impact your customer relationships.

Related – Invoice finance for recruiters or invoice finance for professional services businesses

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What are the alternatives?

If you’re not sure whether invoice financing is the right fit for your healthcare business, don’t worry. There are plenty of other financing options out there, including:

  • Business loans: A traditional business loan could provide the funds you need. However, keep in mind that you’ll need to meet the lender’s criteria and the funds will need to be repaid over a set period.
  • Asset finance: If you have valuable assets, such as medical equipment or property, you could consider asset finance. This involves using your assets as collateral for a loan.
  • Grants: Depending on your circumstances, you might be eligible for a grant. This could provide a cash boost without the need for repayment.

As always, it’s a good idea to seek advice from a financial specialist before making a decision. They can help you understand your options and choose the best solution for your business.

Frequently Asked Questions

Can Invoice Factoring help my care business?

Absolutely! Invoice factoring can be a real game-changer for care businesses. Whether you’re running a small care home or a large healthcare company, invoice factoring can provide a much-needed cash flow boost.

Here’s how it works. Once you’ve provided a service and issued an invoice, you sell this invoice to a factoring company.

They’ll advance you a large portion of the invoice value, typically around 80-90%. Then, they’ll take over the credit control, chasing up the customer for payment. Once the customer pays, the factoring company will pay you the remaining balance, minus their fee.

This can be a real lifeline for care businesses, providing immediate access to cash and freeing up your time to focus on providing top-notch care.

Do you fund all Domiciliary Care businesses?

Invoice financing can be a great fit for a wide range of domiciliary care businesses. Whether you’re providing home care, supported living, or specialist care services, invoice financing can provide the cash flow support you need.

Remember, the key to invoice financing is invoices. If you’re providing services and issuing invoices, then invoice financing could be an option for you. It’s a flexible form of finance that grows with your business, providing more funding as you issue more invoices.

So, whether you’re a small business looking to grow or a larger business needing to manage cash flow, invoice financing could be the solution you’ve been looking for. As always, it’s a good idea to speak to a financial specialist to understand your options and choose the best solution for your business.


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