While a loan or a factoring agreement can help your medical business, the Holy Grail for most players in the healthcare industry is still a medical credit line for businesses. These credit lines may be unsecured or secured by assets, but either way they can be a boon for your company.
- You get access to more cash to run your business. You cannot overemphasize the importance of cash for any medical company. The entire industry depends mostly on insurance companies paying them on time and in full, and that’s not always a sure thing. Insurance companies are notorious for taking their sweet time in making payments, and often they may not agree to the full amount. That means a lot of your working capital is tied up in unpaid accounts receivable.
- You can use the cash for a wide variety of business-related purposes crucial to your company. As the head of a medical company you need to make payroll and pay for overhead. What’s more, you’re in constant need of medical supplies such as bandages, gloves, and syringes. You need to maintain your medical equipment properly, and every now and then you need to upgrade your equipment so that you can compete with other companies which offer the same products and services as you do.
- You only borrow the amount you need, when you need it. When you take out a loan for $200,000, you’ll need to pay interest on this amount even if you don’t actually use all of it. But a line of credit with a $200,000 limit is a different matter altogether. If in a month you only use $100,000 then you only pay interest on $100,000.
- You can set the limit to an amount which you can actually pay. This is quite evident when the line of credit is based on your accounts receivable. Your receivables tell you how much money is coming to you, and that will determine the limit of your line of credit.
- Getting a credit line is quick. It may only take you a few days, and in some cases the money will be available in a day or two. This is crucial when you need the money for a very pressing situation. For example, you can’t ever be late when it comes to payroll or paying for your utilities.
- Sometimes you only need to pay the interest for the amount you owe for that month. It’s much like a credit card. Your loan agreement may only require you to pay the interest, although that means you won’t be able to get more funds for that month unless you reduce the balance of the loan.
To set up a credit line of business, you’ll need to show proof that you your company is in a solid financial state, and that you have the credit history that justifies the trust placed upon you by the lender. You’ll need to prepare your documents, and you may have to offer your inventory, equipment, or your invoices as security for the medical credit line for businesses.