Medical factoring companies do not offer an existing medical practice a loan. In fact, the opposite is true. The medical office is selling third party account receivable invoices to a medical factoring company. This allows the medical factoring company to provide immediate cash payment for the total of the invoices to the medical practice provider. Third party billings are insurance companies such as Blue Cross and other like insurance providers. The medical field is one area that is extremely slow in paying invoices and most medical insurance companies can take up to 120 days to pay an invoice. This causes any medical practice to suffer from serious cash flow issues. Medical factoring changes the face of this situation by taking on the burden of waiting for payment on the outstanding invoices. The sale of medical third party invoices is a great alternative to create working capital immediately. The financial practice that medical factoring offers in financial gains and advantages are enormous. The cash flow that is being generated through the use of a medical factoring company is stable and reliable source. Most medical factoring companies do not set a pre-specified limit of funding. When limits are applied it is direct correlation with the amount of money owed by the third party account receivables. The working capital is immediately released to the medical office allowing finances to be available for purchasing new equipment or simply taking care of payroll responsibilities. Another enormous advantage that medical factoring companies offer the medical practice is that there is no collateral requires. Banks and other traditional lending institutions always require collateral against any loans that are given. This ties up the availability of collateral for expensive medical equipment or leasing contracts. Many potential medical offices that seek the services of a medical factoring company tend to believe that the cost is inherently higher than it actually is. It is expensive when compared to alternative sources such as traditional banking institutions or lines of credit. It should be mentioned that if a medical office or practice has the ability to get a line of credit or a bank loan to help ease the financial difficulty associated with collecting receivables from third party insurance companies, that should be the first avenue to travel down. However, most medical offices do not qualify for bank assistance due to the length of time they have been in business. Medical factoring companies generally offer cash advances of 75-85% on the gross total of invoices that are being factored. The other percentage is kept until the outstanding invoices are paid to the medical factoring company. Once it is paid, the factoring company will issue another payment for the balance minus the predetermined factoring fees. Factoring of accounts receivables is a relatively new practice in the medical industry but it is growing at a phenomenal rate. It is the effective financial tool that can provide the working capital needed for medical practices to meet recurring expenses and equipment purchasing expenses that encourage business growth.
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The term “negative amortization” refers to the potential for your loan amount to increase over time - in other words, you might have reverse or “negative” amortization. These loan programs allow you to pay less that the full amount of the interest due on your mortgage. If you pay less than the full amount of interest due, the difference is added to your principle balance. A typical negative amortization loan has the potential of growing to 125% of its original amount.It Goes By Many NamesNegative amortization mortgages are sold as “Option ARMS”, “Pay Option ARMS”, “Pick-a-Pay” programs, and a variety of other names. The characteristic they share in common is a low payment rate, usually between 1% and 1.95%. This rate is not the true note rate; it is the rate that your payment is based on. The true note rate is a market rate, or “fully indexed rate”, and may be 5% or more above the payment rate.A Nationwide PhenomenonIÂ’m a Florida mortgage broker and also hold mortgage broker licenses in Georgia, Massachusetts, and Virginia. Florida mortgage customers have increasingly turned to these mortgages as real estate values have increased over recent years. This phenomenon, of course, is not limited to Florida. As home values nationwide have increased, borrowers have struggled to find ways to afford homes that once cost half as much.Look at Your Real CostAnd please donÂ’t assume that you are saving money. Without a doubt you are going to enjoy your tiny payment (as long as it lasts), but make sure that you take a good look at the fully indexed rate. This is your real cost. Compare the fully indexed rate with the rate on a good old fashioned 30 year fixed rate mortgage. You might find that the real cost of your super low payment negative amortization loan is quite a bit higher than the fixed rate option that is available.ItÂ’s Not a Fixed Rate MortgageWe often get calls from customers that have been approached by other mortgage brokers offering these products. And it never ceases to amaze me how many of these callers believe that these are fixed rate mortgages. At one percent! Occasionally the caller will be furious at me for dashing their hopes. If you are considering a negative amortization mortgage please make sure that you understand what you are getting. As a Florida mortgage company we deal with a fair percentage of retired people for whom these loans are simply not appropriate. The HELOC ProblemIf you have a negative amortization mortgage you may not be able to get a second mortgage or a home equity line (HELOC). WhatÂ’s up with this? Second mortgage and HELOC lenders base their loans on the amount of equity that you have in your property. Since your negative amortization mortgage has the potential to increase, the amount of equity that you will have in the future is uncertain. You may find that your best bet for a second mortgage or HELOC is with the same lender that gave you the negative amortization mortgage.A Lower Payment is Really NiceThere are some attractive characteristics of negative amortization mortgages. Well, one anyway. You get to make a lower payment. A lower payment can mean many things. It can make that house that you want to buy affordable. And it can free up your cash flow for other things. If you have a pile of high rate credit card debt you might make a very solid case that you are better off making the smaller payment on your mortgage and channeling your savings towards paying down your credit cards.Keep an Eye on Your Monthly BillYou would be well advised to keep an eye on your monthly bill which will tell you how much negative amortization is accruing. Make sure that you donÂ’t drift into a state of denial. When you are ready to sell your home your proceeds will be reduced by the fattened balance of your mortgage. Florida mortgage customers, like those in other states have seen property values soften in the last year. Be aware that your equity could be effected by the market as well.When the PartyÂ’s OverNormally your minimum payment will increase a small amount each year for the first five years. At the end of the five years you loan will be recast. This means that your loan will be amortized over the remaining term of the loan Â– normally 25 years. Make sure that you are prepared for the potential payment change. It doesnÂ’t hurt to ask your mortgage broker to calculate the worse case scenario for you. ItÂ’s best if you know the potential.Copyright Â© 2007 James W. Kemish. All Content. All Rights Reserved.