Why a control account is good for borrowers
One of the features of revolving lines of credit and other financing options is “control account”. These are also commonly referred to as a Deposit Account Control Agreement (DACA) or a “virtual lockbox.”
As mentioned in a previous blog post, a control account is a special bank account that is required by lenders like Inspira in order to offer healthcare providers a line of credit, often when a bank will not. Agreeing to enter into relationship that requires a control account can make some business owners uncomfortable if they are not familiar with the practice. However, there are a couple of reasons why a control account is actually good for borrowers.
First, these kinds of accounts were created so that companies like yours can borrow against your Medicare or Medicaid receivables. Without them, you wouldn’t be able to borrow against them at all. That’s because receivables from federal and state agencies cannot be sold or “assigned” to a third-party because they are subject to anti-assignment laws.
Second, a control account lowers the risk for the lender, allowing them to offer you a revolving line of credit where banks might decline to do so. If a lender knows it can use access to your receivables as collateral, it reduces the risk premium they have to charge your business. That, in turn, reduces the rates they would otherwise charge you. It’s one of the reasons why lending against accounts receivable is generally a better deal for borrowings then selling them to a factoring company.
Third, control accounts drastically reduce the amount of paperwork and hassle for your company. An alternative to borrowing, called a Merchant Cash Advance, often requires daily payments and reports. Control accounts do not require any onerous reporting requirements like that.
Finally, the lender takes out fees and interest from the account directly without you having to cut a check. This makes repayment effortless for you and removes the possibility of your business paying late fees or charges.
Inspira makes it painless
Inspira offers revolving lines of credit (RLOC) exclusively to medical providers like physicians, medical offices, hospitals and healthcare agencies. These lines of credit are based on the practice’s Accounts Receivable from Medicare, Medicaid and other insurers. Inspira requires its clients to use control accounts to help secure its interests in the Accounts Receivable. Unlike factoring, Inspira’s clients retain 100% ownership of their receivables at all times.
One of Inspira’s clients, a successful home health and hospice company, explains what it is like working with Inspira.
“For me, it was more about going with your gut feeling,” explained Belinda Juarez, R.N. and CEO at Superior Home Health and Superior Hospice. “It’s about trusting the company you are working with. For a business owner, that’s hard to do. I felt really comfortable with Inspira. If you’re going to do something like this, you need to do it with a company you trust and have access to. If you don’t, anything can happen.”
Find out how Inspira can help your healthcare business. Start the process online or call us at 844-877-7562.