Home Health Care Loans: How Your Business Can Qualify
Home health care is an exciting, fast-growing field that can allow you to earn a great living while helping seniors and those with disabilities live fulfilling lives at home. Whether you're new a new home health care business owner or consider yourself a veteran in the home healthcare industry, you know there are many costs to run this type of business.
That's where a home health care business loan comes in. It can provide you with the working capital you need to cover a variety of expenses. However, it's important to weigh your small business financing options first.
In this blog post, we'll explain what a home health care loan is and how it works.
What is a Home Health Care Loan?
A home healthcare loan is a loan designed for home health businesses to start, operate, or expand their companies. Many new businesses can get a small business loan to cover startup expenses including licensing, hiring staff, marketing, buying medical equipment, leasing vehicles, and more. These types of medical loans help businesses overcome challenges with cash flow, getting new equipment, and even leasing office space for staff and storage.
How Do Home Health Care Loans Work?
There are different types of home healthcare loans. Each one comes with its own set of requirements and options. Loans for home health care facilities may be different from loans you use to cover monthly salaries. There are SBA loans, cash advances, lines of credit, and even installment loans to consider when you're looking for a homecare loan. A health care business loan can be used for expenses related to operating or expanding a home health care company.
Home Health Care Loan Options
There are a variety of home health care business loans available including:
Traditional Fixed-Term Loan: With this type of loan, you receive a lump sum of money upfront and repay it with interest via fixed monthly payments. A traditional fixed-term loan may make sense if you have a large upcoming expense and know exactly how much financing you need.
Line of Credit: If you'd like some flexibility, a line of credit can be a smart choice. Just like with a credit card, you'll be able to withdraw as much or as little money as you want up to a set credit limit. In addition, you'll only pay interest on the amount you borrow.
Equipment Loan: Chances are you need equipment like software, wheelchairs, walkers, and crutches. An equipment loan is specifically designed to help you pay for it. Your equipment will serve as collateral so the lender can seize it if you default on your loan.
Real Estate Loan: A real estate loan may be a good fit if you need funds to pay for an office building. It's intended for commercial property and can make it easier for you to afford a space for your employees.
Invoice Financing: Invoice financing is when you borrow against outstanding invoices. Note that you probably won't be able to get approved for invoice financing on Medicare and Medicaid payments because it's very unlikely that these providers will let you sell a claim to a third party.
Business Credit Cards: If you like the idea of a business line of credit but only want to borrow a bit of money, a business credit card is worth considering. It's easier to qualify for than other financing types and often comes with cash back or rewards points. As long as you pay off your loan balance every month, you won't face any interest rate charges.
Types of Costs to Cover with a Home Health Care Loan
If you take out a business for a home health care company, you can use it to pay for a wide array of expenses such as:
Overhead Costs: These may include marketing, payroll, and medical supplies. You can think of overhead costs as any expenses you must incur to run your business.
Medical Equipment: There's no denying that medical equipment can cost thousands of dollars. However, it's essential to provide clients with quality care. Some examples of medical equipment are portable oxygen tanks, walkers, wheelchairs, and respiratory devices.
Commercial Real Estate: You probably need an office building for your administrative team to work in on a regular basis. Home care workers may also stop by to drop off paperwork and attend meetings as needed.
Franchise Costs: If your home health care company is a franchise, you'll have to pay franchise costs. These can add up and become very expensive.
Debt Consolidation: In the event your business has a lot of debt, it might be a good idea to consolidate it. This can make your payments far more manageable and debt less overwhelming.
Expansion Costs: At some point in time, you might want to expand your home healthcare business to a new territory. A home health care loan can make this process much easier.
You'll find that home health care loans allow you to fill in gaps in cash flow. These are particularly common in the home health care industry as delays in insurance claims tend to be the norm.
How to Qualify for a Home Health Care Business Loan
Even though every lender that offers home health care business loans has its own requirements, most of them will ask you to provide your personal information like your name, contact details, and Social Security number.
They may also request you show them business bank statements from at least the past three months. While some will consider your business credit score, many will look at your personal credit score. In addition, almost every lender will want you to share a business plan that outlines your goals and what you plan to do with the loan
What are the Start-Up Costs for a Home Health Care Business?
Starting a home health care business comes with numerous expenses. You'll need an office to work out of, medical staff to care for patients, someone to work in scheduling, billing insurance, and more. Plus, there are regulatory considerations for a home health business. Most businesses seek out business loans for home health care facilities because of the following costs and others associated with getting started:
Insurance
Medical malpractice insurance and liability insurance are a must when it comes to operating any medical business. It's also important to make sure your insurance covers all of your staff in the event of something like theft happening in the patient's home.
Licensing Fees
Each state has different regulations regarding home health care business licensing. The fees for this can start as low as $1750 and go up from there. These licenses allow you to operate a home health care business, go to people's homes to provide in-home care, and operate your office as well.
Advertising Expenses
Starting a new business comes with a lot of challenges. Finding clients is of course critical. Advertising comes in numerous forms from Google Ads to social media marketing, to paying for ad space in magazines geared toward your target audience, like AARP. People looking for how to start a business in home health care need to understand how to market effectively for this type of business.
Legal Fees
Setting up your business under the appropriate legal structure is just one of many legal fees you may face as you start your home health business. Some medical entrepreneurs even take out low interest rate health care loans to cover the cost of legal expenses to startup. You'll need legal contracts, HIPAA compliant software, and numerous other safeguards to protect your company and its employees.
Choose the Right Business Loan for Your Home Health Care Company
Before you pursue any loan for your home health care business, consider your goals. Then, shop around to find the ideal financing options for your unique operation. Once you take out a home health care business loan, do your best to repay it. This way you'll keep your finances in check while boosting your business credit score and opening the doors to other opportunities in the future.
Consider an Installment Loan
An installment loan is the perfect option for home health care businesses. Once the commercial lending company receives all the pertinent information, it goes to underwriting. If you qualify for an installment loan, it can be used for almost anything pertaining to your business including leasing office space, paying staff, buying computers and software, and more. Installment loans are much like the consumer loans you would use to buy a car or a house. You receive a one-time large payment with a set amount to repay each month and terms that cover the amount of time to finish paying off the loan plus interest.
How do loan approvals work? First you need to apply. Often, you'll be asked about how much money you are putting into the business and what the funding will be used for. If you're a newer business, the underwriting process may even want to see what contracts you already have in place. You'll need to share how much revenue your business is bringing in as well.
