Alleon Healthcare Capital closed a $2 million medical receivables financing facility with a substance abuse clinic in California.

The company operates two treatment centers and offers services such as detox, residential treatment, partial hospitalization, intensive outpatient treatment, individualized therapy and group therapy.

The company has been in business for almost two years and was not bankable, so it was seeking a medical receivables line of credit to accommodate current operations and continued growth. Additionally, the company was looking to refinance existing debt and improve its revenue cycle management as delay in payments, which is typical for this kind of business, was causing a cash constraint.

The transaction was structured with a borrowing base made up of medical receivables that are billed to commercial health insurance companies. Alleon advanced up to 80% on eligible receivables with no amortization, allowing the company to make interest only payments and have enough cash on hand for operations.

“The Affordable Care Act helped expand behavioral and substance abuse healthcare coverage in the U.S. and spur growth within the industry. We are very active in providing substance abuse clinic financing and were happy to find experienced managers that provide quality care,” said Leon Chernyavsky, managing partner at Alleon.