Many medical transcription service owners (MTSOs) have the tendency to avoid factoring because of the concept that it is more pricey than a bank loan. To be completely truthful, factoring is more expensive than a conventional line of credit; however, the age old stating: "You get what you pay for" comes into play when comparing and contrasting a bank loan to accounts receivable funding.
Medical Transcription Factoring Has a Quick Approval Process
When it pertains to lending cash, banks move slowly. Even in the very best of times, borrowers are required to sign mounds of documentation, supply extensive historical personal and business info, then wait to be accepted by a loan committee. With the current credit situation, the requirements are stricter and waiting times have enhanced considerably.
On the other hand, the approval procedure for medical transcription invoice financing takes a mere 1-3 days upon receipt of the completely completed documents. When authorized, the preliminary cash advance can take place within 24 hours.
Medical Transcription Factors Keep Personal and Business Obligations Separate
In order to be accepted for a bank line of credit, most company owner would be needed to sign a personal warranty, wherein an MTSO is required to presume personal responsibility for repayment of the loan, must business not be able to pay back the responsibility. Furthermore, most banks require an MTSO to pledge additional collateral (i.e. residence or marketable securities). These can be intimidating responsibilities for company owner who strive to keep their individual credit/collateral different from the business's.
Numerous medical transcription funding companies do not ask for a personal warranty. Some factoring companies will only ask a business owner to sign a credibility guarantee, attesting that any invoices he/she offers to the aspect are valid. In addition, the only collateral a factoring company needs is a very first security position on the transcription service's invoices.
Factoring Companies Work with Start-up Medical Transcription Companies
Standard loan providers require their customers to reveal a minimum of 2 years of profitable operations before extending credit. In addition, banks require a clean and strong credit history for both the MTSO and the transcription service.
On the other hand, medical transcription factors extend credit based upon the credit worthiness of an MTSO's customers (i.e. medical clinics, physicians' offices, and hospitals), as opposed to the credit history of the business or its owner. Because of this, many factoring companies have no qualms about extending credit to brand new transcription services.
Credit Limits Grow as the Transcription Business Grows
When authorized for a small business loan, most MTSOs have enough to start their business - get computers and other devices, employ transcriptionists, and market their services to medical centers. However, entrepreneur tend to encounter problems as quickly as the money runs out, which is usually right around the time that the business is ready to actually open its doors. Hence, one huge issue with bank financing is growing out of the maximum line of credit.
With medical transcription factoring, the sky is the (credit) restriction. Medical transcription aspects provide cash based on the quality and liquidity of the business's receivables. Additionally, each account is examined individually, allowing for the supreme in credit-lending versatility. In essence, each time an MTSO begins transcribing for a new credit-worthy consumer, he/she gains instant access to additional capital.
Transcription Factoring Provides More than Cash
Unlike a bank relationship with restricted communication, accounts receivable factoring companies preserve an everyday connection with their clients. Medical transcription aspects keep an eye on invoices, check credit on potential brand-new customers, and offer detailed reports on an ongoing basis for MTSOs. Business owners will be paired with one specific person or department who handles the day-to-day obligations of the transcription owner's accounts.
In addition, there are factoring firms that specialize in funding medical transcription invoices specifically. These specialized aspects are distinctively acquainted with the complexities of the transcription industry - lingo, payment terms, line matters, etc. Whereas, banks deal with all sort of companies, and often times, there's a learning curve that needs to occur prior to funding approval.
As mentioned earlier in this chapter, factoring companies can not compete with count on cost alone. Nevertheless, when looking into the advantages and disadvantages of invoice factoring and bank loans, MTSOs must take the time to take a look at more than just rates, as factoring companies offer a lot more than money.