How cash flow works in an insurance-billing medical practice
In an insurance-based practice, the work and the payment are separated by a claims process. A visit becomes a claim, the claim is adjudicated by the payer, and cash arrives later — on each payer's own timeline. Denials, resubmissions and patient balances after deductibles stretch that further. Payroll, rent, malpractice premiums and supplies are due on a fixed calendar regardless. Pressure appears when something shifts collections while expenses keep their schedule.
Credentialing and new providers
Adding a physician, nurse practitioner, therapist or counselor means salary and onboarding costs start right away, but the new clinician may not be able to bill a given payer until credentialing and contracting are complete. A new location can raise the same issue, and until those claims pay, the expansion runs on existing cash.
Other common timing gaps
- A payer that slows payment or raises denials.
- A billing, clearinghouse or EHR migration that delays claim submission for a period.
- The start of the year, when deductibles reset and more of each visit shifts to patient balances that take longer to collect.
Typical uses of working capital
Medical practices use working capital to bridge payroll while reimbursements catch up, to hire and onboard staff ahead of credentialing, to purchase diagnostic or therapy equipment, to fund an EHR or practice-management implementation, and to open or build out a new location.
One caution: an advance can bridge timing, but it does not fix a revenue-cycle problem. If accounts receivable are growing because of coding errors or unworked denials, addressing that first may free up cash at no financing cost. See working capital for medical practice growth.
What PracticeFloat reviews
- Revenue history and bank-statement activity — the deposits reaching your business account and how steady they are.
- Time in operation.
- Existing advances and obligations already debiting the account.
- NSF and negative-balance history.
- Specialty and use of funds — what kind of practice you run and what the funds will be used for. For insurance-billing practices, the deposits that reach the account from payers and patients are what underwriting sees.
- Owner guarantee — a personal guarantee from the owner is generally required.
The current published criteria are on the homepage under who qualifies; we keep them in one place so they stay accurate.
What you’ll need
You do not need everything to submit an inquiry. The practice review page lists what is typically requested:
- Recent business bank statements
- Existing funding contracts and payoff letters, if applicable
- Practice name and legal entity details
- Owner identification
How the process works
- Inquiry. No hard credit pull to submit an initial inquiry. An inquiry is not an application approval.
- Document review and underwriting. Later underwriting steps may include credit review, depending on the product and funder.
- Written offer. If one is available, it shows the amount, total repayment and payment schedule.
- Signing. Review the agreement, ideally with your accountant or attorney, and sign only if it works for you.
- Funding. Timing depends on verification and on the funding party.
PracticeFloat aims to respond within one business day of a complete inquiry — a target for a first reply, not a promise of a decision or funding. Terms, timing and the funding party depend on whether the transaction is funded by PracticeFloat or a partner funder. See how the process works.
Cost and repayment
Advances are commonly priced with a factor rate: the total repayment is the advance amount times the factor rate, fixed in the agreement. Repayment is made through scheduled daily or weekly ACH debits; the schedule and total repayment amount are disclosed in the agreement before signing.
Costs are typically higher than SBA or bank loans, and because the balance is repaid quickly, the annualized cost is higher than "factor cost divided by years" suggests. For example, an illustrative factor rate of 1.25 repaid over 9 months works out to roughly 62% on an annualized basis (illustrative, not PracticeFloat's pricing). This is educational, not a regulatory APR disclosure.
For an insurance-billing practice, it helps to remember that scheduled debits start on the agreed schedule regardless of when claims pay. Plan for repayment during the same reimbursement lag you are trying to bridge.
Read how much practice funding costs, or model scenarios with the illustrative calculator (examples, not a quote).
When this may not be the right fit
- You have time and you qualify for lower-cost credit. If the need is not urgent, an SBA 7(a) loan or a bank term loan or line of credit usually costs less. SBA 7(a) loans can be used for working capital, equipment and refinancing; you apply through a participating lender rather than the SBA itself, and applicants generally must be unable to get credit on reasonable terms elsewhere (SBA: 7(a) loans). Compare loan products in our healthcare business loans guide. PracticeFloat's advance is not a loan.
- The gap is structural, not timing. If reimbursement rates no longer cover the cost of delivering care, financing delays the problem rather than solving it. Renegotiating contracts or changing the service mix may be the real fix.
- The need is long-term. Buying a building or a long-life asset is usually better matched with long-term financing than with a short-term advance.
Frequently asked questions
Can a working capital advance cover payroll while insurance claims are pending?
Yes, bridging payroll during reimbursement delays is a common use. Keep in mind that repayment follows the schedule in the agreement, not your claims cycle, so build the scheduled debits into the same period you are trying to bridge.
We are adding a provider who is not credentialed yet. Should we wait?
Not necessarily, but size the request so repayment does not depend on that provider's claims paying by a particular date. Credentialing timelines vary by payer, and it is safer to plan as if collections from the new provider start later than you hope.
Is an SBA loan a better choice for a medical practice?
If you qualify and can wait for the process, an SBA 7(a) loan or a bank loan usually costs less than a working capital advance. An advance may make more sense when timing matters or when a loan is not available on reasonable terms. Comparing both is worthwhile.
Does it matter that most of our revenue comes from Medicare, Medicaid or commercial payers?
Underwriting looks at the deposits that actually reach your business bank account, whatever the payer. How a particular practice's revenue is weighed, and whether it qualifies, is determined during underwriting.
Does submitting an inquiry affect my credit?
There is no hard credit pull to submit an initial inquiry. Later underwriting steps may include credit review, depending on the product and funder.