What is the Best Financing Option for Outsourced Medical Coding Companies?

Account Receivable Factoring or Small Business Loan:
Which is a Better Financing Option for Outsourced Medical Coding Companies?

Comparing and contrasting medical coding account receivable factoring to a loan from a bank sounds like a daunting task. To be honest, it’s hard to compare the two equally because one financing mechanism creates debt by lending money (i.e. bank loan), whereas the other one creates immediate cash flow by advancing cash on purchased invoices (i.e. factoring).

Thankfully, comparing the two medical coding funding options doesn’t have to be difficult. Here is a handy comparison chart outlining the key differences between medical coding account receivable factoring and bank financing:

Comparisons

Bank Loan

Account Receivable Factoring

Length of Time in Business

Minimum of 3-5 years

Start-ups are welcome

 



Necessary Documents

Business Plan

Current Business Financial Statement

 

3 yrs Business  Financial Statements

1-2 yrs Business Tax Returns

 

3 yrs Business Tax Returns

Current Invoice Aging Report

 

3 yrs Personal Tax Returns

Current Accounts Payable Report

 

Current Personal Finance Statement


 



Underwriting requirements

Good personal credit and good business credit

Selling to creditworthy customers

 



Collateral

Personal and/or business assets

Medical Coding Accounts Receivable

 



Approval Time Period

Weeks to months

3-5 business days

 



Effects on Balance Sheet

Debt created

Debt-free

 



Ability to Borrow

Fixed loan amount or line of credit

Line of capital grows as company grows

 



Additional Services

None

Check Credit of New Customers

 


Statement Processing

 


A/R Management

 


Merchant Payment Services

As you can see from the above chart, medical coding account receivable factoring eliminates many of the difficult-to-meet criteria of a traditional bank loan. It’s an especially good financing option to consider now because it’s become increasingly more difficult to qualify for a traditional small business loan. Ultimately, outsourced medical coding business owners have to decide for themselves which is the best financing fit.