Asset based lending in Bethesda, MD is becoming one of the more popular working capital solutions for small businesses in the area. Instead of using traditional loans and taking on debt,…
Finding adequate healthcare financing can be a challenge. Finding healthcare financing that not only provides working capital but also increases the potential for growth can seem like a fairy tale. However, of the three main types of healthcare financing, only one offers capital without debt, as well as a means of promoting growth for your facility. Let’s take a look at how they stack up against each other.
Using Loans for Healthcare Financing
Using loans for healthcare financing seems like a conventional move, but the decision keeps getting riskier all the time. The requirements to access funds keep getting higher and the interest rates are now prone to seemingly arbitrary hikes. Even with those factors aside, loans do not have any long-term benefits. Many practices and larger healthcare facilities have a tight cash flow as it is. Taking on additional debt with loans increases liabilities while eating into revenue. Many medical practices and hospitals go under because the burden of debt from loans outweighs the amount of revenue coming in on a monthly basis.
Cash Advances for Healthcare Financing
Cash advances are offered to healthcare practices as a way to get around traditional loans. The big selling points are that cash advances do not place debt on the books, and there are no fixed payments, because the balance is repaid from a small percentage of total revenue. Digging a little deeper, cash advances are not exactly the greatest healthcare financing solution. While there is no debt with a cash advance, there are many hidden fees and extra charges to make up the difference. Additionally, while repayment is certainly flexible, the end result is a prohibitively large balloon payment when the terms are up. When all is said and done, cash advances can place a huge strain on finances and potentially end up being worse than taking out a loan.
ABL Healthcare Financing
Asset based healthcare financing – or ABL healthcare financing – offers a much different approach than either loans or cash advances. Unlike loans ABL healthcare financing does not place any debt on the balance sheet. Also, ABL financing is transparent, so there are no hidden or balloon fees, unlike cash advances. The really big difference is how ABL financing offers growth potential to the healthcare industry. ABL is a revolving line of credit structured around the value of owned assets such as equipment, vehicles, receivables, and more. Healthcare facilities can draw on this line of credit as needed, and the amount of financing available is replenished when the balance is repaid, just like other business lines of credit. However, as a medical practice of healthcare facility adds or upgrades equipment, sees an increase in receivables, or purchases additional assets, the line of credit will increase, promoting growth without the hindrance of debt or hidden fees.
CNH Finance specializes in ABL healthcare financing solutions. Contact our offices today for financing tailored to your needs.