Handling Healthcare Finances
Long-term financing refers to funding loaned or taken to be repaid within a period longer than a year. On the other hand, short term finance refers to loans issued out or taken repayable within periods not longer than a year (Braendle, T., & Colombier, C. 2016). Health care firms generally refers to financial bodies that aid persons receiving healthcare services to cater for their treatment expenditure under long- or short-term basis. Since health care firms are business entities that deal with disbursement of funds, they are susceptible to requiring financial services from financial institutions depending on prevailing circumstances. This paper addresses the different circumstances under which healthcare firms require long term or short-term financing. It also addresses the factors that distinguish short-term and long-term financing. A highlight is also given on when it is necessary for those firms to acquire short term financing.
Healthcare firms may require long term finances when they need to fund a long-term financial objective. Under these circumstances, the healthcare firm will undergo a lesser period of time to gather money for the ball to start rolling for their business. As a result, it will take a shorter time to achieve the set targets compared to if the firms were to wait to collect that money from the profits they make. According Baker et al.,(2017) healthcare firms would consider long-term finances, if they want to stand a chance to build a solid relationship with a financial lender who is well familiar with the business of health insurance. This advantage extends to enabling the healthcare firm to be more credit worthy. If the firm wants to leave ownership to fewer entities, long-term borrowing is the best option.
Under contrasting situations, healthcare firms choose to acquire short-term finances. When the firm is short of operational finances, a short-term loan comes in handy. Even in a condition where there’s an emergency like a customer requiring huge amounts of cash for treatment, a short-term loan is suitable. Arising expenses that are periodical are dealt with by short-term borrowing.
Short- and long-term borrowing differ beyond the periods within which they are payable. While interest rates for long-term finances remain relatively unchanged, short-term finances have fluctuating interests (Harford et al., 2018). Short-term loans are suitable for randomly arising expenses, long term borrowing is best utilized for prolonged ventures and in handling analyzed risks. Banks give short-term finances but long-term loans are given out by firm investors.
A healthcare firm manage can for short-term finance aid if a need arises. An analysis is conducted to weigh whether the short-term finance is necessary or not. When the firm is at its developing stages, the manager can ask for a short-term finance to boost the business. If the firm is short of operational finances especially when there’s a fall in the number of customers, a short-term loan comes in handy. Short term credit is also necessary during emergencies that require urgent money unavailable at the moment. The situation is also similar during low seasons for the healthcare firm.
References
Baker, J. J., Baker, R. W., & Dworkin, N. R. (2017). Health care finance. Jones & Bartlett Learning.
Braendle, T., & Colombier, C. (2016). What drives public health care expenditure growth? Evidence from Swiss cantons, 1970–2012. Health Policy, 120(9), 1051-1060.
Harford, J., Kecskés, A., & Mansi, S. (2018). Do long-term investors improve corporate decision making? Journal of Corporate Finance, 50, 424-452.