In a world where it is becoming increasingly more difficult for a medical transcription service to receive timely payments from their customers, factoring for the medical transcription industry can come to the rescue. Selling their invoices at a discounted rate, also known as factoring, gives medical transcription businesses the money they need to help maintain and grow their operations. Instead of waiting 30, 60, 90 days or longer for payment from their customers, factoring provides the cash needed to meet payroll, pay taxes, purchase software and/or increase staff. And all of this can be accomplished without increasing debt on a firm’s balance sheet, which could limit future financing alternatives. Medical transcription funding is best be utilized to bridge the gap between when an invoice is issued and when payment is received.
Another reason why medical transcription services should look into selling their receivables is that factoring companies do not base their funding capabilities on a business owner’s personal credit or even the company’s credit history. Rather, factors are most concerned with the creditworthiness of the medical transcription service’s clients, who are also called account debtors; to pay them after the invoice has been sold. A traditional bank, on the other hand, would be less concerned with the service’s customers. From a banker’s perspective, it’s the business owner’s personal credit and the company’s operating and financial history that will determine whether or not they would approve any loan amount.
With that said, there are literally thousands of factoring companies to choose from, all of which offer distinct advantages and disadvantages. The most important question to keep asking while searching for an accounts receivable factor is: “Will this factor best be able to meet my medical transcription funding needs?”
Keeping that key question in mind, factors can generally be divided into three different operating categories. First, there are large factors that operate nationally and are able to fund clients across numerous different industries. These factors usually work out of multiple offices, and they are set up to cater to the needs of very large businesses. Because of their size and national presence, these factors are capable of funding almost any kind of company, from staffing to manufacturing to transportation. These factors are true generalists both across industries and geographic regions.
Then there are some factors that focus their operations in one specific geographic region. These smaller local factors have a home field advantage so to speak, in which their clients find comfort in the fact that their factor is literally around the corner. These factors will generally fund a wide variety of businesses; however they will all be concentrated in a definable geographic region.
The final category is comprised of factors that concentrate their funding in one specific niche, offering a heightened level of industry expertise to their clients. Their customers are generally national in scope, but are focused on a small handful of industries such as medical transcription factoring or medical coding factoring. These factors’ clients feel more comfortable knowing that their funder understands the unique characteristics of how their industry operates. PRN Funding is just one example of an industry-specific factor because we focus on the healthcare vendor industry, namely medical staffing, medical coding, medical supply and medical transcription invoice funding.
The size of your business, the services/products that you provide and whom you sell to all play a part in choosing between the three types of factors. Whether or not you should go with a general or industry-specific factor, a national or a local one, one that funds larger companies or one who works with start-ups all depends on what you want for your own company. It all goes back to that original question, “Will this factor best be able to meet my medical transcription financing needs?”
Stay tuned for the next article in this three-part series, which will discuss the differences in rates and fees among factors and teach you how to compare and contrast to find the best factor to meet your medical transcription factoring needs.
