Healthcare Financing Options: Breaking Down the Pros & Cons

May 17, 2018 by CNH Finance, LP in category “Financing”

There are a number of healthcare financing options available for small private practices, large hospitals, and everything in between. With the most popular healthcare financing options, there are good points and drawbacks which may make them unfeasible in the long run.

Healthcare Financing Loans

Healthcare financing loans provide working capital to practices of all sizes. These function in much the same way as standard bank loans, but with specific uses, such as for supplies, medical equipment, and vehicles.

Pros: Working capital, often in amounts proportional to the size of the practice.

Cons: Debt, impacted credit ratings, prepayment penalties, limited use

Cash Advances for Medical Practices

Cash advances offer seemingly more flexibility than traditional loans. The infusion of working capital has no restriction on use, so the money can be utilized for everything from equipment to supplies, advertising, and even paying down existing debt. The big point lenders try to stress is that cash advances are debt-free and do not impact credit ratings. What is not told to practices is that cash advances have incredibly high interest rates due to the lack of collateral, and the payment method frequently leaves healthcare providers with large balloon payments.

Pros: Debt-free working capital, no scheduled payments, flexibility

Cons: High interest rates, additional fees, large balloon payments

In both cases, financing must be taken in one lump sum, which places a large burden on medical practices. In the case of loans, a portion of revenue must be set aside monthly to make payments. With cash advances, the balance is repaid from a percentage of receivables paid by patients with credit cards – cash, check, and other methods do not count towards the amount owed. Unless there is a high volume of patients using credit cards to pay off their invoices, the balance on a cash advance rarely reaches zero by the end of the terms.

There is a Third Option

Instead of going into debt or taking on huge financial liabilities, many medical practices are finding healthcare financing through asset based lending. Asset based lending is a revolving line of credit structured around the inherent value of things such as equipment, receivables, property, and more. The line of credit gives medical practices a source of healthcare financing which can be drawn upon as needed, and then replenished. As a practice grows, so does the amount of financing available.

CNH Finance offers comprehensive healthcare financing options. Contact our offices today to learn how asset based lending can provide the capital your practice needs, without any of the drawbacks.

Image for 'Bethesda, MD Assisted Living Centers: Finding Renewable Working Capital'
Bethesda, MD Assisted Living Centers: Finding Renewable Working Capital

Bethesda, Maryland assisted living centers provide housing and services to an increasingly growing population. However, between staggered payment schedules, and the high cost of…

Image for 'Leveraging Assets For Working Capital'
Leveraging Assets For Working Capital

For new and growing businesses, having access to working capital is essential for continued success. However, many entrepreneurs have a tough time accessing the prohibitively high…

Image for 'Ambulatory Surgery Centers: Working Capital Solutions'
Ambulatory Surgery Centers: Working Capital Solutions

Ambulatory surgery centers provide vital services to patients while simultaneously taking a large burden off of general hospitals. However, ambulatory surgery centers need supplies,…

Image for 'Assisted Living Centers: Getting Long Term Capital'
Assisted Living Centers: Getting Long Term Capital

Assisted living centers provide very integral services to people. However, between supplemental insurance programs and staggered payment schedules, access to working capital can be…

CNH Finance
24 East Ave #1285
New Canaan, CT 06840
Phone: (203) 266-3210

Business Development
Long Beach, CA 90803
Phone: (562) 833-7815

Business Development
3334 E. Coast Hwy, Suite 541
Newport Beach, CA 92625
Phone: (714) 520-1788

Melinda Ficek
mficek@cnhfinance.com

Maryland Office
3 Bethesda Metro Center, Suite 723
Bethesda, MD 20814
Phone: (301) 529-9993

Steve Silver
ssilver@cnhfinance.com

Business Development
5050 Quorum Drive, Suite 700
Dallas, TX 75254
Phone: (972) 687-9157

Rossi Felix
rfelix@cnhfinance.com