Revenue-Based Financing for Medical Practices
Revenue-based financing gives a medical practice a lump sum repaid as a share of collections, so the payment dips when a payer pays late and rises when claims catch up. It fits practices whose deposits move with claim cycles and patient volume. The total to repay is fixed up front, so strong months pay it off faster without lowering the cost.
Why a share of collections fits a practice
Deposits follow claims, not visits
A busy month of appointments turns into deposits weeks later. A revenue share takes its cut as money actually arrives, so it doesn't demand a fixed amount in the month a big payer is slow.
Government payers and collection
Because Medicare and Medicaid payments generally can't be assigned, revenue-based funders usually calculate their share from total deposits and debit the practice's account rather than taking payments directly from payers. Ask how the funder counts each kind of revenue.
Revenue share math for a slow month
Take $150,000 of average revenue, $68,000 advanced and a $87,040 repayment cap. 6% of sales goes back each month.
| Month | Revenue | Remittance at 6% | Remittance as a share |
|---|---|---|---|
| An average month | $150,000 | $9,000 | 6.0% |
| A slow month, 23% under average | $115,500 | $6,930 | 6.0% |
About $6,930 leaves in a slow month. Roughly 10 months of average sales repay it. Staffing at offices of physicians (NAICS 6211) varies only 1.9 points by month in BLS data; your own statements set the slow month.
Where practices use it
- Adding a provider or a service line that takes months to pay back.
- A new location's staffing before patient volume builds.
- Marketing and technology, like a new practice management system.
Terms to check
What counts as revenue
Confirm whether patient financing payouts, capitation payments and refunds are included or excluded.
Minimum payments and reconciliation
If the funder debits an estimated share and adjusts later, find out how often it reconciles. Monthly reconciliation on uneven insurance deposits can leave you overpaying for weeks.
Changes to the practice
Ask what happens if a provider leaves or the practice joins a larger group, since both change collections.
Sizing the share for a practice
A lower share takes longer to reach the cap, which leaves more cash each month but keeps the funder in your account longer. Match the share to what collections can spare in a slow payer month, not an average one.
Quick answers
Does revenue-based financing work for a medical practice?
Yes, it suits practices whose collections move with claim cycles. The payment is a share of deposits, so it drops when a payer pays late and rises when claims catch up. Confirm how government payments, patient financing and refunds are counted before signing.
How do revenue-based funders collect from a medical practice?
Usually by calculating a share of total deposits each week or month and debiting it from the operating account. Because government payments generally can't be assigned, funders rarely take payments directly from payers. Ask how often they reconcile the debit against actual collections.
What if a provider leaves during revenue-based financing?
Collections usually drop, and with a true revenue share the payment drops too. The balance takes longer to clear. Check the contract for a minimum payment and for rules about changes in ownership or providers, since some treat big changes as events that need the funder's consent.
More for medical practices
- Same-day merchant cash advance for medical practices
- Second position MCA for medical practices
- MCA consolidation for medical practices
- Business line of credit for medical practices
- How funders read medical practices
- Revenue-based financing: how it works
Run your own numbers with the factor rate calculator.
Want to see what fits a medical practice like yours?
Tell us your slow months and your open advances, and we'll shop the file with funders whose programs fit. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.