Borrowing Base Factoring for Home Healthcare Companies

Demographic, political and technological trends are combining to support massive growth in the home healthcare industry, yet access to credit for business owners in the industry remains elusive. Learn how borrowing base factoring solutions can help companies remain competitive.

For small-business owners access to credit remains elusive. One reason is lenders reserve secured or unsecured business lines of credit for only their “best” customers—those with strong profits, increasing revenue trends, high balances on deposit and non-seasonal cash flow. New businesses, established businesses that are growing too quickly, or businesses with seasonal dips, declining revenue trends or in default of loan covenants are regularly turned away from traditional bank financing.

One industry particularly impacted by the new credit reality is the home healthcare industry—a fast-growing industry of over 25,000 companies providing medical and caregiver assistance to patients in their own homes. The industry has taken off for several reasons: an aging population that wants to stay at home; an increased prevalence of patients requiring care for chronic disease; acceptance by physicians for home care; improved portable medical technologies; and a focus on cost-efficient treatments.

Companies providing home healthcare technology solutions are also experiencing a boom. Not only have there been tremendous developments with portable technologies, but the increase of mobile applications and Internet-connected equipment has contributed to the legitimacy of home service as a viable alternative to hospitals, nursing homes or hospice.

Alternative access to working capital

Home healthcare companies are increasingly considering two financing options to grow business: factoring accounts receivable or taking loans against Medicare and Medicaid revenues. To factor a receivable, a business issues an invoice and the factoring company pays approximately 75%-80% of the customer’s amount due. Then, once the customer makes payment, the business receives the balance, less a factoring fee.

Gibraltar takes a unique approach to factoring. Instead of the invoice-specific method of traditional factoring, our borrowing base factoring operates like a line of credit. We aggregate all eligible invoices to create a borrowing base for our clients, allowing businesses to borrow what they want, when they want—and pay fees only on what they borrow.

A capital case study in home healthcare

Home healthcare companies, like many companies in the B2C service industry, are paid on net terms. One example is a New York-based company with $10 million in sales, growing revenues, and a seasonal cash flow that needed working capital to hire more staff, meet payroll and address cash-flow issues caused by the seasonal nature of the business. After being declined for a business credit line and small business loan, the ownership thought their only options were to raise money from private equity, pare down operations or sell the business. They did not want to give up a stake in the business and the latter two options were not viable—this was a growing enterprise.

That’s when ownership turned to factoring, realizing the financing option could provide added liquidity to fund operations and grow the business. Even with factoring costs, the business has forecast increased profits due to a new capacity to generate more revenue.


Before factoringAfter factoring
Cost of Goods/Services Sold$6,500,000 (65%)$13,000,000 (65%)
Gross Profit$3,500,000 (35%)$7,000,000 (35%)
Variable Cost$1,000,000 (10%)$2,000,000 (10%)
Fixed Costs$2,000,000$2,000,000
Cost of FactoringN/A$1,000,000
Net Profit$500,000 (5%)$2,000,000 (10%)

Not only is the home healthcare industry one of the fastest growing industries for employment, it has the potential to positively impact the quality of life for millions of people.

Chris Lehnes, SVP, Loan Originations, Gibraltar Business Capital


Gibraltar is committed to working with business owners to secure working capital to grow their businesses. Find out more about how factoring with Gibraltar works here.

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