Home Care Loans: Costs, Terms & Requirements

A home healthcare loan can help small businesses fund a territory expansion, new business acquisition, or finance immediate working capital needs. Because of the speed of growth in the home healthcare industry, the best home healthcare business funding options are quick and inexpensive. These loans can help you get quick access to growth capital.

Best Home Healthcare Loans at a Glance

How We Determined the Best Home Healthcare Loans

The home healthcare industry is one of the fastest-growing industries in the United States, with the US Census Bureau predicting industry growth of 41% by 2026. This means that home healthcare businesses have many expenses related to growth activities like entering new geographic territories, buying other businesses, hiring new employees, and day-to-day working capital needs.

Your business needs funding available to sprint at the pace of the industry when it’s time to expand or take on new patients. Cash flow throughout the industry is difficult to rely on due to insurance payments. The instability of these payments can create cash flow challenges when an opportunity comes up for you to expand into a new territory or buy out another business’s book of patients.

Short-term Loans for Home Healthcare Businesses

A short-term loan is a lump-sum loan with fixed weekly or monthly amortized payments. These loans have higher interest rates and short repayment terms of less than three years but don’t have hidden fees or charges. You can receive up to $500,000 in-home healthcare business funding and will get access to your funds within one to three days.

Short-term loans are best to fuel growth or other initiatives with a defined return on investment, which your home healthcare business will need. For example, the industry is growing so quickly that a new territory from your franchiser can open and only be available for a short moment of time—meaning you must come up with the funds to expand before a competitor takes the opportunity.

Short-term Loan Costs

• Starting interest rates: As low as 9.99%
• Expected APR range: 10% to 100%
• Prepayment penalty: None

Short-term Loan Terms

• Loan amount: Up to $500,000
• Repayment term: Three to 36 months
• Repayment cycle: Weekly
• Time to funding: One to three days

Short-Term Loan Qualifications

• Credit score: At least 600
• Time in business: At least one year
• Annual business revenue: At least $100,000

Business Lines of Credit

A business LOC is an approved maximum amount of money you can draw from repeatedly. You’ll only pay interest on the current draw, so it’s a more affordable solution than other loans if you need financing in small spurts. You won’t have to reapply every time you need financing, and you can get approved for a credit line up to $100,000.

A business line of credit is best for home healthcare companies looking to pay for recurring working capital expenses while waiting for insurance payments from patients. For example, you can use a line of credit to fund the purchase of medicines, replace equipment, or cover occupational therapist insurance premiums if your cash flow is tight because you’re waiting for payments from health insurance providers.

Business Line of Credit Costs

• Starting interest rates: As low as 13.99%
• Expected APR range: 14% to 75%
• Prepayment penalty: None
• Other fees: Some lenders may charge service fees or other fees if you don’t use your line of credit within a year, but these fees aren’t common

Business Line of Credit Terms

• Loan amount: Up to $100,000
• Repayment term: Up to 12 months
• Repayment cycle: Weekly or monthly
• Time to funding: One to three days

Small Business Line of Credit Qualifications

• Minimum credit score: 600
• Minimum time in business: One year
• Annual business revenue: At least $100,000

Business Credit Cards

Business credit cards work like a business line of credit but are easier to qualify for and have a smaller financing amount. You’ll typically get approved for less than $30,000 in financing and can qualify for cash back or rewards points to use on purchases within your business. Since you have 30 days to pay off what you spend, a business credit card can work like an interest-free loan.

A business credit card is something that every home healthcare business can use. It’s best used to make small working capital purchases throughout your day-to-day operations. For example, you can use a card to cover the fuel for your nurses or physical therapists as an added work incentive. This could help you keep employees in a competitive job market, and it’s also good to pay for recurring expenses like insurance premiums.

Business Credit Card Costs

• Interest rate: 15% to 29%; some have 0% introductory offers
• Annual fee: Up to $350

Business Credit Card Terms

• Loan amounts: Up to $100,000 but typically less than $30,000 for most businesses
• Repayment terms: 30 days interest-free
• Time to funding: Instantly to two weeks (the time to receive your card)
• Initial rewards: Introductory APR of 0% for seven to 18 months, and a cash bonus (or points bonus) if you spend a certain amount within the first two to six months
• Ongoing rewards: Cashback or rewards points

Business Credit Card Qualifications

• Credit score: At least 680 for best offers

SBA Loans for Home Healthcare Businesses

Traditional lenders like banks offer SBA loans that are partially guaranteed by the SBA. These loans offer the longest repayment terms and lowest interest rates available to small businesses. SBA loans are difficult to qualify for, and it can take months to receive funding.

There are many types of SBA loans from which to choose. Overall, these loans are best used by home healthcare businesses to expand or buy out another home healthcare business. While SBA loans are best for established businesses, you could get approved as a startup.

SBA Loan Costs

• Interest rate: 8% to 11%
• Prepayment penalty: None and you can save money by paying it off early
• Origination fee: 0.5% to 3.5%
• Loan packaging fee: $2,000 to $4,000
• SBA guarantee fee: 2% to 3.5%

SBA Loan Terms

• Loan amount: Up to $5 million
• Repayment terms: Up to 10 years
• Repayment cycle: Monthly
• Time to funding: At least 30 to 90 days

SBA Loan Qualifications

• Minimum credit score: 680
• Collateral: Typically required
• Down payment: At least 10% to 20%
• Time in business: Any, from startups to mature businesses

3 Ways to Improve Your Loan Approval Chances

Home healthcare is the fastest growing industry in the country, so you have plenty of financing options. However, there are things that could trip you up during the application process, which may disqualify you for a loan. Knowing common factors that prevent home healthcare businesses from getting approved before you apply can improve your chances if you address them.

1. Show Your Ability to Repay the Home Healthcare Loan

When preparing to apply for a business loan, you need to make sure you have prepared proper financials that include projections for three years or more. The projections will give the lender a good idea of whether your business plan is attainable and what your potential cash flow could look like. This is a good indicator of whether you’re able to repay the loan.

A best practice is also showing in your business plan how you plan to use the capital to grow the revenue of your business. More revenue means more cash coming into the business for you to make these debt payments.

2. Demonstrate Your Creditworthiness

Being able to show a strong personal credit score goes a long way in showing a potential lender you’re a responsible borrower worth taking a chance on. Your credit history shows your lender how you’ve dealt with past credit accounts. Therefore, it’s important to have the highest score you can when you apply.

While your business credit score won’t always be a factor in approving your loan, it’s a good opportunity to show a potential lender how your business deals with debt. Having a strong business credit history shows your potential lender that your business has handled debt in the past and that you’ve chosen to make your loan payments.

3. Convince Lenders You Can Deal With Unexpected Circumstances

You need to convince lenders you’ll pay your loan payment first, no matter what happens. In the home healthcare industry, it can be difficult knowing when you will lose a patient and take a dip in revenue. If your business is struggling to get new patients, then it might be time to think about a new sales and marketing strategy.

Bottom Line

The home healthcare industry is booming, and it can be difficult to keep up with the rapid growth opportunities and hiring demands. You need quick home healthcare business funding options you can access to help when growth opportunities become available.