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:
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Comparisons |
Bank Loan |
Account Receivable Factoring |
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Length of Time in Business |
Minimum of 3-5 years |
Start-ups are welcome |
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Necessary Documents |
Business Plan |
Current Business Financial Statement |
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3 yrs Business Financial Statements |
1-2 yrs Business Tax Returns | |
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3 yrs Business Tax Returns |
Current Invoice Aging Report | |
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3 yrs Personal Tax Returns |
Current Accounts Payable Report | |
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Current Personal Finance Statement |
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Underwriting requirements |
Good personal credit and good business credit |
Selling to creditworthy customers |
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Collateral |
Personal and/or business assets |
Medical Coding Accounts Receivable |
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Approval Time Period |
Weeks to months |
3-5 business days |
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Effects on Balance Sheet |
Debt created |
Debt-free |
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Ability to Borrow |
Fixed loan amount or line of credit |
Line of capital grows as company grows |
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Additional Services |
None |
Check Credit of New Customers |
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Statement Processing | |
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A/R Management | |
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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.
