How do I calculate it?
Total monthly operating costs: payroll and benefits, rent, supplies, software, malpractice insurance, and debt payments. Multiply by your average days in AR divided by 30, then add a cushion for delays.
Your billing reports show days in AR. If it averages 40 days, you need more than a month of costs to bridge the cycle. Practices with long AR or many slow payers need more.
What changes the number?
Adding providers or locations, a new payer with slow processing, rising supply costs, and seasonal swings all increase it. Faster collections, more self-pay and memberships reduce it.
Recalculate whenever the practice changes size or payer mix. The goal is a cushion that lets you make decisions calmly instead of reacting to cash shortfalls.
How do practices build the cushion?
Set aside a fixed percentage of collections each month, collect patient balances at the time of service, and reduce days in AR through cleaner claims.
Reducing AR days is often the fastest way to free cash: every day removed puts a day of revenue back in the account. Funding can bridge until those improvements take hold.
| Line | Source | Your figure |
|---|---|---|
| Monthly operating costs | P&L | — |
| Days in AR | Billing reports | — |
| Months to bridge | AR days ÷ 30 | — |
| Cushion | Payer risk | 2–4 weeks |
Worked example: a primary care group short of its target
A primary care group averaging $260,000 in monthly deposits calculates that it needs about two months of costs on hand, but holds only five weeks, leaving roughly $65,000 short. Using an illustrative factor rate of 1.20, $65,000 would mean $78,000 repaid over roughly 6 months: 126 daily payments of about $619.
That works out to about $13,000 a month, or 5.0% of the $260,000 this business deposits monthly, and the total cost of the money is $13,000. Bridging the shortfall gives the group breathing room while it works down AR days to build the cushion on its own.
For comparison, repaying the same $78,000 over 4 months would lift the monthly outlay to about $19,500, or 7.5% of deposits, and whether the faster payoff is worth that bigger payment depends on how steady your slow months are.
| Average monthly deposits | $260,000 |
|---|---|
| Amount funded | $65,000 |
| Factor rate (illustrative) | 1.20 |
| Total repaid | $78,000 |
| Cost of the funding | $13,000 |
| Term | about 6 months |
| Daily payment (126 payments) | $619 |
| Payments as a share of deposits | 5.0% |
Who this fits
Usually a fit
- Practices short of their working capital target
- Groups expanding providers or locations
- Owners improving collections
When a practice may want to wait
- Practices already well capitalized
- Owners without a collections plan
- New practices without deposits
What you’ll typically need
- Recent business bank statements
- AR report
- P&L summary
- Practice details
Frequently asked questions
What is a good days-in-AR number?
It varies by specialty and payer mix; compare your trend over time.
Should patient balances be collected upfront?
Collecting at the time of service reduces AR and improves cash flow.
Can funding build my reserve?
It can bridge while collections improvements build the reserve over time.
What credit score do I need to fund a practice reserve shortfall?
For a practice reserve shortfall, owners with scores from 500 can be considered because recent deposits carry the most weight, and stronger credit usually earns a lower cost and a larger offer.
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Updated October 6, 2026