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Factoring Will Enable Companies to Pay Healthcare Reform Costs

By Kristin Gabriel

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Published: 25Apr2010
Word count: 442
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During the last year, the economy has made it very difficult for many small business owners. In order grow, and in some cases, stay in business, businesses need cash. Now business owners are faced with more expenses from the new health care reform laws.

Some small businesses have discovered a solution known as accounts receivable factoring, a way to garner fast cash. The new health care reform laws will not be fully implemented until the year 2018. Many small business owners will feel the impact almost immediately, while others will not.

In the remaining year of 2010, businesses with fewer than 26 employees and average annual wages of less than $50,000, who pay more than half of their employees' health benefits, can claim a tax credit of up to 35 percent of the premium costs. A self-employed individual who has medical conditions will be able to buy insurance at reduced rates. And by fall, health insurers will not be able to put lifetime limits on insurance. If a company has less than 100 employees, they will be eligible for grants to set up wellness programs in the year 2011.They will also be able to offer bonuses of up to 30 percent of the cost of insurance, and the law requires them to disclose the value of health-care benefits the W-2 forms of workers.

By the year 2013 the wealthy will see Medicare taxes rise to 2.35 percent. This is up from 1.45 percent. It includes earnings of over $200,000 for individuals, and $250,000 for those who are married. Tax-exempt contributions to flexible spending accounts for medical expenses will be limited to $2,500 per year. And, employers' tax deductions for the cost of a retired person's Medicare drug benefits will be eliminated completely.

Any legal U.S. resident must have insurance by the 2014. Individuals and small businesses with up to 100 employees will be able to shop for coverage via a health exchange. Insurers will not be allowed to reject anyone with a pre-existing condition. And finally, companies with 50-plus employees that don't offer insurance could face penalties of $2,000 per person.

As cost increase to meet the new insurance coverage requirements, small businesses must be prepared to avoid penalties and pay. This is how accounts receivable factoring can assist them. Factoring companies first typically look at the creditworthiness of the client's customers, and they do not expect to buy 100 percent of a company's receivables.

Since most companies don't get paid immediately for delivered products or services, factoring benefits businesses that do not get paid for 30, 60 or 90 days by advancing up to 90 percent against the company's invoices.

Factoring enables a company to get short-term working capital, pay higher insurance costs, and improve cash flow and grow their businesses.

Kristin Gabriel is a writer who works with The Interface Financial Group (IFG), North America's largest alternative funding source for small business. The company provides short-term financial resources including invoice factoring, serving clients in more than 30 industries in the United States, Canada, Australia and New Zealand. IFG offers expertise in factoring, accounting, finance, law, marketing and banking.

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