Comparing Medical Transcription Factoring to Bank Loans

Many medical transcription service owners (MTSOs) tend to shy away from factoring because of the notion that it is more expensive than a bank loan. To be perfectly honest, factoring is more expensive than a traditional line of credit; however, the age old saying: “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 comes to lending money, banks move slowly. Even in the best of times, borrowers are required to sign mounds of paperwork, provide extensive historical personal and business information, and then wait to be approved by a loan committee. With the current credit crisis, the requirements are stricter and waiting times have increased dramatically.

On the other hand, the approval process for medical transcription invoice funding takes a mere 1-3 days upon receipt of the fully completed documents. Once approved, the initial cash advance can happen within 24 hours.

Medical Transcription Factors Keep Personal and Business Obligations Separate
In order to be approved for a bank line of credit, most business owners would be required to sign a personal guarantee, whereby an MTSO is required to assume personal responsibility for repayment of the loan, should the business not be able to repay the obligation. Moreover, most banks require an MTSO to pledge additional collateral (i.e. house or marketable securities). These can be daunting responsibilities for business owners who strive to keep their personal credit/collateral separate from the company’s.

Many medical transcription funding firms do not ask for a personal guarantee. Some factoring firms will only ask a business owner to sign a validity guarantee, attesting that any invoices he/she sells to the factor are valid. In addition, the only collateral a factoring firm requires is a first security position on the transcription service’s accounts receivables.

Factoring Firms Work with Startup Medical Transcription Companies
Traditional lenders require their borrowers to show at least two 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 on the credit worthiness of an MTSO’s customers (i.e. medical clinics, doctors’ offices, and hospitals), rather than the credit history of the business or its owner. Because of this, many factoring firms have no qualms about extending credit to brand new transcription services.

Credit Limits Grow as the Transcription Business Grows
Once approved for a small business loan, most MTSOs have enough to jumpstart their business – buy computers and other equipment, hire transcriptionists, and market their services to medical facilities. However, business owners tend to run into problems as soon as the cash runs out, which is usually right around the time that the business is ready to literally open its doors. Hence, one big problem with bank financing is outgrowing the maximum credit line.

With medical transcription factoring, the sky is the (credit) limit. Medical transcription factors provide cash based on the quality and liquidity of the company’s receivables. Moreover, each account is evaluated individually, allowing for the ultimate in credit-lending flexibility. In essence, each time an MTSO starts transcribing for a new credit-worthy customer, he/she gains immediate access to additional capital.

Transcription Factoring Provides More than Cash
Unlike a bank relationship with limited communication, accounts receivable factoring firms maintain a day-to-day connection with their clients. Medical transcription factors monitor invoices, check credit on potential new customers, and provide 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 exclusively. These specialty factors are uniquely familiar with the intricacies of the transcription industry – jargon, payment terms, line counts, etc. Whereas, banks work with all kinds of companies, and often times, there’s a learning curve that has to happen before funding approval.

As stated earlier in the article, factoring firms cannot compete with banks on price alone. However, when researching the pros and cons of invoice factoring and bank loans, MTSOs should take the time to look at more than just pricing, as factoring firms offer so much more than money.

The Difference Between Mortgage Brokers and Bank Loan Officers

For many people around the world a house is the largest asset they will ever own, and so the decision of buying one can be truly daunting. Getting a mortgage involves responsibility and it can very well become a burden if dealt with wrongly, or if the all the aspects are not taken into account.

There are statistics showing that approximately 50% of mortgage seekers settle upon the first loan offered by their own financial institution, without further research or interest in the subject. Very often people do not demand more information about other possible loans, and instead agree with any type of mortgage offered, without realizing the possible repercussions of their actions.

Regarding the services of consulting offered to home buyers who decide to get a mortgage loan, there are two types of professionals that are available, and those are bank loan officers and independent loan officers (most often mortgage brokers).

A loan officer at a bank or any other financial institution is normally the pleasant person that presents the institution’s services, their job being that of accepting the application that the client has handed and then pass it on to other departments of the institution. Also called “mortgage loan originators,” bank loan officers may recommend an appropriate type of application, as they specialize in commercial, consumer and mortgage loans.

On the other hand, a mortgage broker generally offers a larger variety of services, including advising the client about the best loans available on the market (without settling on a single financial institution), communicating directly with the underwriter and gathering and assessing the necessary documentation for the process to ensure the approval of the loan.

Many people prefer to go through the traditional procedures, which involve approaching their personal bank and dealing with the bank loan officer, without accepting another route.

What happens, then, if you decide to use a mortgage broker?

First of all, there is the generally wrong assumption of extra fees that come along with the services of a mortgage broker, which makes people avoid considering the option in light of the already huge costs that await them with the mortgage loan. But in reality, the assistance that mortgage brokers offer will not cost much more (if at all) than that received through a big bank, as mortgage brokers rely on the commissions they get from the mortgage loan value, which can vary from 0.5% to 1.5% in some situations.

Moreover, the overall cost when using a mortgage broker may actually be lower, as mortgage brokers have many sources of loans available to choose from, in comparison to a bank, who will only have a limited number of loan products to offer, because while loan officers, who work to sell mortgages originated by their employer, have quite a wide selection of loan products to offer, those originate from a single financial institution, which, in many ways, makes them much more limited than in the case of mortgage brokers, who will have at their disposal many loan types from various financial institutions.

The difference between bank loan officers and mortgage brokers is undeniable, but while it appears that mortgage brokers will offer a larger variety of options at an overall lower cost, it cannot be ignored that a large number of home buyers prefer the comfort that the familiar loan officers of their own bank give them in such a big decision that will affect their entire lives.