Medical receivables factoring turns unpaid insurance claims into cash now: a factor advances most of the claim’s value and collects the balance, minus its fee, when the payer pays. It works most simply with commercial insurance and business customers. Medicare and Medicaid claims are different, because federal rules stop those programs from paying a factor, so funders handle them through an account in your practice’s name or with a loan secured by the receivables.
This page is part of our medical practice financing hub. It explains what medical factoring costs as funders publish it, how the Medicare and Medicaid rules shape the deal, and what to check before you sign.
How medical factoring works
A practice, lab, home health agency or medical supplier submits claims or invoices. Instead of waiting for payment, it sends the receivables to a factor, which:
- Checks the receivables. The factor reviews who owes the money (insurers, government programs, hospitals or other businesses), how old the claims are, and how much payers typically pay against the billed amount.
- Advances a percentage. The advance is a share of the value the factor expects to collect, not always the billed charge. altLINE, a division of The Southern Bank Company, says clients can “generally expect a factoring advance rate of 80-90% of your invoice’s face value.” Green Capital Funding advertises advances of “up to 80%” of medical claims.
- Collects and settles. When the payer pays, the funds go to a lockbox or account, and the factor releases the rest of the money to you after taking its fee.
If you are new to factoring in general, start with what invoice factoring is and how it works.
What medical factoring costs
Factors price with a factoring fee: a percentage of the invoice or claim value charged for a set period, such as the first 30 days, often with more charged for each extra period the claim stays unpaid. A factoring fee is not an APR. An APR expresses the yearly cost of credit including fees, so a 2% fee for 30 days works out to a much higher annual figure. Compare offers on the total dollars you pay, not the headline percentage.
Figures checked on September 21, 2026, as each funder publishes them:
| Funder | Advance rate | Fee as published | Speed | Other terms stated |
|---|---|---|---|---|
| altLINE (The Southern Bank Company) | 80-90% of face value | Initial fee “between 0.90% and 3.50%” of face value, typically for the first 30 days; incremental fees “between 0.25% and 1.50%” | Advance “within 24-36 hours” | Recourse only; lockbox “under each company’s name” |
| 1st Commercial Credit | Not stated as a percentage | “Factoring rates from 0.69% to 1.59%” (period not stated on the page) | Account setup in 24 hours; “3 to 5 Day Initial Setup” | Funds receivables from Medicare, Medicaid, HMOs and private insurance; excludes copays and receivables past 180 days |
| Green Capital Funding | “up to 80%” | Fee percentage not listed | “Cash in as Little as 24 Hours” | “No Up Front Fees” |
Sources: altLINE, 1st Commercial Credit, Green Capital Funding.
Not every funder puts its fee or the period it covers on its website, so ask each one for a written quote that shows the advance, the fee for each period, any setup, lockbox or wire charges, and a worked example on one of your own claim batches. Our guide to invoice factoring rates covers the common fee structures.
A simple example
Using altLINE’s published ranges for illustration: on $50,000 of claims, an 80% advance puts $40,000 in your account. If the fee is 2% for the first 30 days and the payer pays within that window, the fee is $1,000 and you receive the remaining $9,000. If the claim runs past 30 days, incremental fees start to add up, which is why payer speed matters as much as the rate.
Medicare and Medicaid: why they are handled differently
This is where medical factoring differs most from factoring in other industries, so it is worth reading the rules themselves.
Medicare. Federal regulations say “Medicare does not pay amounts that are due a provider to any other person under assignment, or power of attorney, or any other direct payment arrangement” (42 CFR 424.73). A matching rule covers suppliers. There are narrow exceptions, including payment under a court order and payment to a billing agent whose pay “is not related in any way to the dollar amounts billed or collected.”
Medicaid. The Medicaid rule names factoring directly. It defines a factor as an organization “that advances money to a provider for accounts receivable that the provider has assigned, sold or transferred” to it for a fee, and says payment “may not be made to or through a factor, either directly or by power of attorney” (42 CFR 447.10).
What funders do instead. CMS guidance lets Medicare payments go to a bank “for deposit in the provider/supplier’s account” as long as “the account is in the provider/supplier’s name only and only the provider/supplier may issue any instructions on that account.” The same guidance says a bank may provide financing to the provider, but a third party providing financing “cannot purchase the provider/supplier’s Medicare receivables” (CMS Medicare Claims Processing Manual, section 30.2.5).
In practice, that means government receivables are usually financed rather than sold. 1st Commercial Credit, for example, describes the setup this way: “We have to establish a lock-box under your business name, and then forward the funds to us.” The structure is often closer to an asset-based loan than a true sale. Have a healthcare attorney review how any agreement handles Medicare and Medicaid money before you sign.
Who uses medical factoring
Funders list a wide range of healthcare businesses. 1st Commercial Credit says it finances “nursing homes, doctors, medical practices, hospitals, home healthcare companies, rehab clinics, MRI and radiology centers, ambulance service providers, laboratories and others.” altLINE lists home medical care, medical equipment providers, medical staffing and medical coding companies. Healthcare staffing firms, which invoice facilities rather than insurers, have their own options; see healthcare staffing factoring.
Factoring tends to suit businesses that are growing, have a gap between billing and payment, and have steady, clean claims. It suits them less when most revenue comes from patient self-pay, which funders often exclude, or when claims are frequently denied.
What factors look for
- Payer mix. Commercial insurers, government programs and hospitals are what funders lend against. 1st Commercial Credit excludes “private copay receivables” and says it does not fund chiropractor clinics or certain workers’ compensation, personal injury or no-fault receivables.
- Claim age. Older claims are worth less to a factor. 1st Commercial Credit excludes receivables “past 180 days.”
- Collection history. Expect to share aging reports and remittance data so the factor can estimate how much each payer pays against billed charges.
- Billing quality. Denial rates, coding accuracy and whether you bill electronically. Noridian, a Medicare contractor, says clean electronic claims can be paid “as early as 14 days after receipt,” while paper claims are not paid “before the 29th day” after receipt (Noridian Medicare). Faster payment means lower fees.
- Licensing and compliance. 1st Commercial Credit lists a “third party payer analysis and compliance review” as part of onboarding.
Medical factoring vs. other options
| Option | How it works | Can suit | Trade-offs |
|---|---|---|---|
| Medical factoring | Advance against claims; factor collects or receives payments via lockbox | Fast-growing providers with commercial payers | Fees can add up if payers are slow; government claims need special handling |
| Healthcare asset-based line | Revolving loan secured by receivables, usually with a deposit account in your name | Larger providers with Medicare or Medicaid volume | More reporting; bank-style underwriting |
| Business line of credit | Draw and repay as needed, priced as interest | Practices with good credit and steady profits | Credit limit may not grow with billings |
| SBA 7(a) working capital | Term loan with SBA guaranty | Longer-term working capital needs | Slower to close; more paperwork |
For a side-by-side of these two approaches, see business line of credit vs. invoice financing.
Pitfalls to watch
- Payment routing that breaks the rules. If an agreement assigns Medicare or Medicaid payments to the funder, or sends them to an account the funder controls, it may conflict with the regulations above. Keep government deposits in an account in your name.
- Recourse you did not expect. With recourse factoring, you buy back claims that are not paid. altLINE, for one, states it “is a recourse factor.” Denied claims are common in healthcare, so plan for buybacks. See recourse vs. non-recourse factoring.
- Fees that compound. A low fee for the first 30 days can grow if payers take 60 or 90 days. Model your slowest payer, not your fastest.
- Blanket liens. Many funders file a UCC lien on all receivables or all business assets, which can block other borrowing. See UCC liens and invoice factoring.
- Patient data. The funder will see claim information. Ask how it protects that data and whether it will sign a business associate agreement.
- Contract length and minimums. Ask about minimum monthly volume, termination notice and exit fees.
FAQ
Can you factor Medicare receivables?
Not as a true sale. Federal rules bar Medicare from paying amounts due a provider to anyone else under an assignment, and CMS guidance says a financing party “cannot purchase the provider/supplier’s Medicare receivables.” Funders usually finance them instead, with payments deposited into an account in the provider’s name.
How much does medical factoring cost?
It depends on the funder, your payers and how quickly they pay. altLINE publishes an initial fee of 0.90% to 3.50% of face value, typically for the first 30 days, plus incremental fees of 0.25% to 1.50%. 1st Commercial Credit quotes rates from 0.69% to 1.59% without stating the period. Ask for a written quote on your actual claims.
How fast can a practice get funded?
After setup, advances often arrive within a day or two. altLINE cites 24-36 hours and Green Capital Funding advertises cash in as little as 24 hours. The first funding takes longer because the factor reviews your payers, claims and compliance; 1st Commercial Credit cites a 3 to 5 day initial setup.
Is medical factoring a loan?
A true factoring deal is a sale of receivables; 1st Commercial Credit describes it as “a sale of receivables rather than borrowing.” Arrangements for Medicare and Medicaid receivables are often structured as loans secured by those receivables. Ask your accountant how a specific agreement should be recorded.
Next step
Before you talk to funders, pull an aging report by payer and note each payer’s average days to pay. With that in hand, our medical practice financing page explains how we help you compare factoring, credit lines and loans from the lending partners we work with, so you can see terms side by side.
Sources
- 42 CFR 424.73: Prohibition of assignment of claims by providers
- 42 CFR 447.10: Medicaid prohibition against reassignment of provider claims
- CMS Medicare Claims Processing Manual, Transmittal 213 (section 30.2.5, Payment to bank)
- Noridian Medicare: Clean claims payment and interest
- altLINE: Medical receivables factoring
- 1st Commercial Credit: Medical providers
- Green Capital Funding: Medical factoring
About this page. Written by Ezra Cabrera, Content Team Lead at SMB Compass. Figures were checked against the primary sources listed above on September 21, 2026; lenders change their terms, so confirm current terms before you apply, and let us know if you spot a figure that has changed. SMB Compass is a business financing broker: we don’t lend our own money, and we are paid by the lenders we place loans with. This page is general information, not financial, legal or tax advice.