How Factoring Works for Drug Testing Clinics

It may appear that drug testing clinics are a thriving business given the worldwide fight against illegal drugs. Many companies around the globe require job applicants to undergo drug testing as part of the job application process. Even employees, athletes, and government workers are randomly tested for drugs. But the truth is that drug testing companies are not spared from cash problems despite the seemingly thriving drug testing industry.

Not all clients of drug testing centers pay in cash, however. Most of them use credit cards. Add to this the fact that drug testing centers are not spared from typical cash flow problems caused by increasing overhead and equipment costs. Thus there will always be periods when a drug testing clinic�s funds get depleted.

How Factoring Works for Drug Testing Clinics

So how can drug testing centers address cash flow problems? Many of them apply for factoring financing, an arrangement wherein invoices are sold to factoring lenders. Clinics can get as much as 80% of the amount indicated in the invoices. The balance less the service fee is then remitted to them by the factoring lender when the invoice is collected.

Factoring for drug testing centers is considered as the best financing solution for these small businesses that normally don�t qualify for bank loans. Banks have stringent loan requirements that most drug testing clinics find difficult to comply with. Apart from requiring clinic owners to present collateral, banks would ask management of drug testing centers to show numerous documents like financial statements, articles of incorporation and even annual reports. These stringent requirements often discourage owners of drug testing centers from applying for a bank loan, aside from the long processing time that a bank loan takes.


Processing of a factoring facility for drug testing centers is faster compared to a bank loan. Usually, a factoring line can be approved within a day or two by most factoring companies. Thus managers and owners of drug testing firms don�t have to wait for weeks or months to get their hands on cash that can be used for paying wages, rent and other operational costs.

Applying for a factoring facility also means that a drug testing center can get cash that could be used for expansion and marketing efforts. The money advanced from a factoring arrangement may be utilized for acquiring new equipment, hiring new personnel or advertising its services in newspapers and other media outlets. In some instances when the factoring lender agrees to take charge of the invoice collection, the arrangement frees the drug testing center personnel from collecting payments from their clients. Instead, the personnel can focus on other productive tasks like getting new institutional partners.

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General Articles about Accounts Receivable Financing and Factoring:

»   08/01/2012 Debt Financing or Off Balance Sheet Financing?

»   11/30/2012 Utilizing Factoring as a Alternative to Traditional bank Credit

»   07/22/2012 Increase Your Business Lines Of Credit By Factoring Accounts Receivables

»   09/15/2011 What to know when selecting a Factoring Company

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