Medical Supplies: Rethinking The Purchasing Model

April 20, 2017 by CNH Finance, LP in category “Financing”

From small family practices to large healthcare centers, purchasing medical supplies is a constant routine. Medical supplies also make up a considerable portion of any budget for healthcare providers. Over the past year, medical practices have been switching to a new method for getting the capital needed to purchase the supplies they need without relying on loans.

The Traditional Model

As with any business, receivables play a major role in the total amount of working capital available. Medical practices are unique, in that receivables are often greatly staggered. Patients do not always pay on time or in full, and insurance supplements work on their own schedule. This can create a very tight cash flow, with not much working capital left over after overhead expenses are met. When it comes to purchasing medical supplies, many practices will take out short-term loans or cash advances to get the capital they need. Loans compromise credit ratings and place debt on the balance sheets, which is not good, especially if the reason for the loan is to purchase basic supplies. Cash advances, while they do not involve any debt, have very high interest rates and additional fees which prevent practices from repaying the total amount in the allotted time frame.

The New Purchasing Model For Medical Supplies

Instead of going into debt, compromising credit ratings, or dealing with high repayment fees and interest rates, practices are using a different source for working capital. Medical practices are leveraging the value of their equipment, receivables, inventory, vehicles, facilities, and more to create a revolving line of credit. While the line of credit does not place any debt on the balance sheets, it also does not have prohibitive fees. It is treated like any other revolving business line of credit. Working capital is used for purchases, and then a monthly payment is made to replenish the amount. This is known as asset based lending. Asset based lending can be used for purchasing medical supplies, paying down bills, and even growth capital.

Improving Your Purchasing Power

Asset based lending is also the only form of financing that grows with your medical practice. As a practice acquires new equipment, sees an increase of receivables, and other improvements, the line of credit also grows. This gives practices proportional financing to purchase more medical supplies and anything else they need.

Talk To The Experts

At CNH Finance, we work directly with medical practices of all sizes to create working capital solutions through asset based lending. If you are looking for a more affordable way to get working capital in order to purchase medical supplies and promote long-term success, contact our offices today.

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