A healthcare line of credit is a revolving facility — draw what you need, repay, draw again — sized to bridge insurance reimbursement cycles, cover payroll between peak billing weeks, and fund opportunistic supply purchases. Rates reference the Federal Reserve prime index; approval turns on FICO, deposit consistency, and active licensure.
A line of credit is the most versatile working capital tool for a healthcare practice — not because the financing need is largest, but because the cash-flow pattern makes a revolving facility the most efficient structure. Insurance reimbursement DSO creates predictable gaps: payroll runs every two weeks, rent runs on the first of the month, but Medicare deposits arrive in irregular batches based on claim submission and adjudication cycles. A revolving line lets the practice draw the gap, clear it when deposits land, and reset — without reapplying for a new loan each time the gap recurs.
Line of credit underwriters evaluate healthcare practices on deposit consistency over 12 months — not gross billings or submitted claims. For practices with Medicare/Medicaid concentration, CMS Medicare billing and claims processing guidance shows clean electronic claims clear in 14–30 days, but secondary claims and appeal cycles extend average DSO to 45–90 days. Underwriters normalize deposit averages across the full 12-month window to account for reimbursement timing variation; a practice with consistent monthly deposits between $20K–$40K scores better than one showing $60K months and $8K months even if the annual totals are similar. Federal Reserve H.15 prime rate is the standard variable-rate index for healthcare lines — variable-rate lines reprice as the Fed adjusts the target range, which matters for longer-term LOC planning.
Healthcare lines of credit structure as: (1) Unsecured revolving line — $25K–$250K, no collateral beyond a personal guarantee, interest only on outstanding balance, variable rate (prime + spread); (2) Secured revolving line — $250K–$1M+, may be secured by AR or general business assets; lower rate due to collateral; (3) HELOC or home equity tie-in — some practices use owner-occupied real estate equity to secure a lower-rate LOC; this crosses personal and business risk — use cautiously. For payroll cycle bridging: a practice with $50K biweekly payroll and 30–45 day reimbursement lag needs a LOC sized at $50K–$100K minimum to avoid payroll shortfalls on the weeks where insurance deposits haven't cleared. Most LOC draws are wire or ACH; same-day draws are standard at bank and non-bank lenders.
The SBA 7(a) program includes revolving working capital as an approved use of proceeds — practices with 2+ years of operating history and 650+ owner FICO can access SBA-backed revolving lines up to $5M. SBA revolving lines run at lower rates than non-bank alternatives (9–13% APR vs. 15–30%+ at non-bank lenders) but require 30–90 day processing. For practices with clean licensure and HIPAA standing, SBA is the optimal long-term structure for a standing revolving line — more flexible than a term loan and cheaper than non-bank revolving options. Under 13 CFR Part 121, NAICS 621–623 healthcare practices qualify by revenue threshold for SBA programs.
LOC underwriters evaluating healthcare practices look at: HIPAA compliance continuity — an OCR investigation or settlement introduces ongoing liability that some bank-tier lenders treat as a reason to pause a revolving credit facility; Stark Law and Anti-Kickback compliance — practices with outside investor arrangements involving referral sources must disclose these; medical malpractice insurance — active coverage with no carrier non-renewal is required; state licensure — any gap or board action triggers a lender review, even if the underlying matter is resolved; and AR aging concentration — a practice with 60%+ of its AR in a single payer (including Medicare) faces concentration-risk pricing on the LOC spread. Practices maintaining clean compliance standing, consistent monthly deposits, and active malpractice coverage typically access LOC facilities at the tighter end of the pricing range.