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Understand your
approved line of credit
Hard costs vs. soft costs
To properly manage your approval line, it is essential that you
submit the correct information for processing. The process begins by
understanding the difference between "hard" and "soft" costs.
Total approval line and working capital
At times your approval line may also include up to 25% of equipment
cost in working capital, which is considered a soft cost and is subject
to the hard/soft ratios identified in your approval letter. The "working
capital" portion of your approval line is completed as a separate
financing agreement and does not require invoice copies to be submitted for payment.
Working capital can be used for a variety of expenses including advertising and
marketing fees, office supplies, stationery, miscellaneous expenses, and more. The
maximum term for working capital is 60 months, including deferrals.
Example B: $100,000 working capital allowance within 70%/30% of remaining
approval balance
Amount Classification Use
$17,500 Working capital Advertising/marketing costs
$70,000 Hard costs Equipment purchases
$12,500 Soft costs Leasehold/tenant improvements
(e.g., construction, electrical, flooring, etc.)
Approved line of credit
Your "approved line of credit," also referred to as "approval line," is the
amount of credit you have qualified for. Approvals may be subject to
specified hard- and soft-cost ratios, which will be identified in your
approval letter.
Example A: $100,000 total line 70%/30% hard/soft ratios
Amount Classification Use
$70,000 Hard costs Equipment purchases
$30,000 Soft costs Leasehold/tenant improvements
(e.g., construction, electrical, flooring, etc.)
Once you have
an approved line
of credit in place,
you can use it to
pay for equipment
purchases,
leasehold/tenant
improvements,
other soft costs and
working capital.
The first step is
to understand the
components of your
approval line and
how to apply them
to your practice's
expenditures.
How to maximize your line of credit to finance your practice needs
