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Factoring: The Funding Solution for Medical Coding Companies

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By Phil Cohen

Factoring: The Funding Solution for Medical Coding Companies

Even though there are signs that the economy is on the rebound, it’s still tough for small businesses to find financing. Banks remain steadfast on their lending criteria and credit card companies continue to raise interest rates and decrease credit limits. So how can medical coding companies weather the economic downswing if traditional funding sources don’t let up on their credit restrictions? The answer is simple – medical coding factoring.

Factoring, also known as invoice funding, is the process of converting a company’s receivables into cash by selling outstanding invoices to a ‘factor’ for a discount. Invoice funding is particularly useful to medical coding companies because many of their customers expect prompt delivery of coding services, while extending their payment terms. Selling its invoices to a factoring firm allows a medical coding company to increase their cash flow without acquiring debt.

Medical Coding Invoice Funding Provides Immediate Access to Working Capital

Medical coding companies provide coding on a daily basis; however, they typically don’t receive payment for those services until weeks after the work has been completed. Waiting to be paid makes it harder for these businesses to meet their financial obligations in a timely manner. Selling medical coding invoices to a factoring firm is a speedy solution to fill the cash flow gap. For starters, the factoring application process is quick and easy. In most cases, a factoring firm only needs to review a current invoice aging report and an executed application to get the process started. Once approved, medical coding companies can receive cash within hours of selling invoices.

Medical Coding Factoring Helps Build Business Credit

One of the best things about factoring is that it’s not the same as a small business loan. Because of this, there is no debt, and there are no monthly payments to ‘muddy up’ the company’s balance sheet. Funding stops with a bank loan whenever the business reaches its credit limit; with factoring, medical coding companies can continue to factor as often as the business has outstanding invoices and needs more cash. What’s more, once a medical coding business owner establishes an adequate cash flow, he/she can use money from factoring to address debts as well as pay overhead, salaries and invoices. This will improve the business’ credit history and make it easier to obtain credit from vendors and other financial institutions in the future.

Medical Coding Factoring Allows Companies to Leverage Their Customers’ Credit

The economic climate has undeniably been hard on a lot of small businesses over the past year. Naturally, as a result of slow payments coming into the business, many medical coding companies have had to slow down their outgoing payables, damaging the company’s overall credit rating and making them unappealing to a traditional lender. Fortunately, a business owner doesn’t need to have good credit or a long-term profitable operating history to qualify for medical coding factoring services. All he/she needs is creditworthy customers. Fortunately, most physicians’ practices, medical clinics and hospitals are financially sound institutions, so business owners can use this to their advantage when applying for medical coding funding with a factoring firm.

Invoice factoring has increased in popularity in the last year, as it’s been one of the only funding industries that did not make drastic credit cuts and/or increase its financing fees. As the economy starts picking back up again, factoring allows medical coding companies to ease the cash flow gap and build business credit without having to go further into debt.

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Phil Cohen

About the author

Philip Cohen is the founder and President of PRN Funding, LLC. PRN Funding is an extraordinarily focused niche player in healthcare funding. With years of…... Read More

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