It’s very difficult to secure a loan these days, especially if you want a medical business line of credit. Fortunately for you, you do have assets you can use to secure a line of credit. As a medical company, you can use your equipment or inventory as security and you can even get a loan based on the value of your accounts receivable. With an asset based medical business line of credit, you can borrow money up to the limit determined by the value of your assets.
These limits all depend on the particular lender you partner with. For example, a lender can offer up to 85% of the value of the invoices, while also offer 50% or even 75% of the value of the inventory.
So what are the benefits of getting this type of funding?
- There are numerous types of medical businesses which can take advantage of this type of financing. Hospitals, clinics, hospices, and nursing homes are all ideal businesses. Medical clinics which offer specialized services can also be eligible, such as dialysis centers and diagnostic clinics. Even medical supply and equipment suppliers will also benefit greatly from this type of funding.
- It may actually be somewhat easier to secure an asset based loan than you think. The requirements are less stringent than an unsecured loan. You only need good financial statements and reporting systems. If you will use your inventory, your products should be commonly sold. If you’re using your accounts receivable, they should involve creditable, trustworthy customers and payers.
- It doesn’t take too long to secure a line of credit. It can take as short as a month. That’s not long, compared to how long you need to negotiate with a bank to avail an unsecured loan.
- The interest rate isn’t high as you may have feared. It’s certainly lower than what you’d need to pay if the loan is unsecured, since the lender can simply seize your assets if you’re unable to pay back what you borrow. And the line of credit is much less expensive than medical factoring, since you still have to process the invoices and collect the payments from your customers yourself.
To assuage the concerns of your lender, you may want to establish a more long-term financing relationship instead of one that only lasts a few months. You may also be asked to personally guarantee the loan. In most cases, the lender will require the payments from your customers to go to them directly.
But despite all these drawbacks, an asset based medical business line of credit can work wonders for your company, as they can ensure that you have the working capital you need to keep your business afloat without experiencing any major cash flow problems. You can meet payroll, improve operations and even grow your business with the help of a line of credit.