A business line of credit for a NEMT company: receivables, banks, and the Medicaid payment rule

A line of credit is built for the NEMT payment lag. Payroll runs every week or two, and brokers, Medicaid, and facilities pay weeks after the ride. With a line in place, you draw on payday, the deposits pay the balance down, and you pay interest only on what is drawn. What makes a NEMT line different from a landscaper’s or a contractor’s is who owes you the money. Medicaid payments come with a federal rule about who may receive them, and brokers write offsets into their contracts. Both shape how a bank secures the line and how much it will let you draw.

How a line covers the gap between rides and deposits

Start with the clock your payers run. MTM’s provider agreement (Pennsylvania posts the version dated January 1, 2023) pays an undisputed, correctly filed invoice within 30 days once you enter it online. Add the days a trip waits before you bill it and the time the deposit takes to post. Your payroll does not wait for any of that. NEMT broker payment schedules has each broker’s billing window and pay cycle, and managing NEMT cash flow walks through forecasting the low weeks.

A line fits this pattern because the need comes and goes. A term loan hands you a lump sum and a fixed payment whether you need the cash or not. A revolving line lets you borrow $20,000 before a payroll run, repay it when the broker deposit lands two weeks later, and borrow again. Keep the line for timing gaps only. If the company loses money on each trip, a line just postpones the problem.

Why Medicaid money changes how the bank secures the line

Medicaid receivables are not ordinary collateral. 42 CFR 447.10 lets the state pay only the provider, with narrow exceptions such as a government agency, a court order, or a billing agent paid by the cost of processing rather than a share of collections. Paragraph (h) forbids paying a factor, whether directly or under a power of attorney. A factor here means a collection agency, service bureau, or anyone else that pays a provider up front for receivables the provider has assigned, sold, or transferred.

So a lender cannot have your Medicaid claims paid to itself. What it can do is lend to the company, file a lien on its assets, and get at the money after it lands in your account. Section 30.2.5 in chapter 1 of Medicare’s claims processing manual lays out an arrangement that stays inside the federal rule:

• The account is yours alone. Deposits go to an account titled to the provider, and no one but the provider gives the bank instructions on it.
• The lending bank can hold it. The bank that lends to you may also be the bank that receives the deposits, if the loan agreement waives the bank’s right of offset in writing.
• Transfers run on your order. A standing order to move funds to the lender’s account is allowed, but if you cancel it, the bank must honor the cancellation even though that breaches your loan agreement.
• No purchase of receivables. Whatever the financing agreement says, the lender may not buy the receivables.

That section covers Medicare only. Before you open the deposit account your Medicaid payments will go to, confirm with your state Medicaid agency, or a lawyer who handles health care, whether the same structure satisfies the state, and ask for that answer in writing.

Where the Uniform Commercial Code fits

Expect your lender to file a UCC financing statement, which under section 9-310 is the general way to perfect a security interest and puts its claim on your assets on the public record. Deposit accounts are different. Under section 9-312(b)(1), a lien on a deposit account itself is perfected only by control. A bank has control of accounts held with it automatically, and another lender gets control through a control agreement under which the bank follows that lender’s instructions. That is the friction point: a control agreement letting a lender direct the account where Medicaid pays would conflict with the sole-instruction setup Medicare describes. States adopt their own versions of the code, so your lawyer should read the security agreement against your state’s statute.

Broker receivables need one more check. MTM’s agreement lets you assign your right to be paid if MTM receives written notice and a copy of the assignment no fewer than 30 calendar days before the earliest payment it covers. If your loan documents assign broker payments to the bank, that notice is due.

The borrowing base: what the bank will lend against

Most receivables-based lines set availability with a borrowing base: the receivables that qualify, times an advance rate. SBA’s rules for the Working CAPLine show the tests a lender applies, and NEMT receivables run into several of them.

• Advance rate. At most 80 percent of qualifying domestic receivables. After the first draw, the lender may move the rate up or down by as much as 5 points on its own.
• Disputed or adjustable accounts. A receivable subject to any adjustment, deduction, dispute, or counterclaim is ineligible. MTM’s agreement lets it offset overpayments and recoupments against future payments and withhold liquidated damages from its payments, so trips under appeal or flagged for penalties are likely to be cut.
• Past-due invoices. On a line disbursed against a borrowing base, invoices more than 90 days past due drop out. If a customer is late on more than half of its open invoices, every invoice from that customer drops out.
• Affiliates. Money owed by a company you also own, for example an adult day program, does not count.
• Long terms. An account due more than 180 days after its invoice date, by its original terms, is out.
• Concentration. When one customer’s invoices exceed 20 percent of total receivables, they are excluded unless the customer fits a short list: a public company rated A or better, a federal government account, a customer with a long and positive payment history with you, a federal prime contractor or subcontractor, or a credit-insured account. The lender writes a justification for those, or needs SBA’s consent otherwise.

Concentration hurts most when a single broker sends you the bulk of your rides. Here is a hypothetical fleet at month end with $62,000 of receivables:

With the broker’s history documented, eligible receivables are $50,000 and the line has $40,000 available at 80 percent. Without it, the broker’s $38,000 drops out, eligible receivables fall to $12,000, and availability is $9,600. Bring the broker’s payment history to the bank, listed by deposit date. The days in A/R calculator shows how fast each payer turns invoices into cash.

SBA lines a NEMT company can apply for

Three 7(a) products work as revolving credit:

• SBA Express. Lines as large as $500,000, approved under the lender’s own credit process, with SBA guaranteeing half. Drawing and paying off together can stretch to 10 years. Once a line runs past 12 months, the payoff stretch can be no shorter than the drawing stretch, and drawing ends after year five. Lenders may renew it annually inside those limits and cannot charge for the renewal.
• Working CAPLine. For businesses that generate receivables or hold inventory, to fund short-term operating needs only. Proceeds cannot pay delinquent payroll withholding taxes. The maturity can be up to 10 years. Lines under $2 million can be disbursed against a borrowing base certificate or on a 1:1 collateral ratio, and larger lines must use the certificate. A line of $1 million or more needs a yearly field exam of the receivables, and lenders may charge servicing fees above 2 percent for policing the base.
• 7(a) Working Capital Pilot. Monitored lines that top out at $5 million and 60 months. SBA aims it at companies with a year or more of operating history that keep current financial statements and receivable and payable agings. Its upfront fee for fiscal year 2027 runs from 0.25 percent of the guaranteed portion on a line of 12 months or less to 1.35 percent for 49 to 60 months.

Express rates may float no more than 6.5 points over prime up to $50,000. The spread falls to 6.0 points through $250,000, 4.5 through $350,000, and 3.0 above that. Prime stood at 7.00 percent on September 30, 2026. The ownership, guarantee, and fee rules that apply to all three are in the SBA loan guide.

Covenants, guarantees, and the annual review

A line is a relationship the bank re-examines every year. On a Working CAPLine, the lender must at least once a year collect updated year-end and interim statements and review the credit and the collateral again. SBA Express lines may carry non-financial default provisions, conditions that put the loan in default even when every payment is on time, but they must be substantive, agreed in writing at closing, and the same ones the lender uses on its own similar loans. A line can be payable on demand under stated conditions, but it still needs a final maturity date.

Expect personal guarantees. On SBA lines, anyone owning 20 percent or more signs a full personal guarantee. Personal assets also back a growing share of small business debt: in the Federal Reserve’s 2025 Small Business Credit Survey, 38 percent of employer firms with debt had secured it with the owner’s personal assets, up from 31 percent in 2019.

What a line costs next to factoring and a cash advance

The same 35-day gap costs very different amounts depending on how you fill it. These are examples, not offers:

Factoring is off the table for claims the state pays, as NEMT factoring explains. A merchant cash advance is easier to get, with 12 percent of applicants denied in the Federal Reserve’s 2025 survey, and far more expensive.

Getting approved before you need it

Apply while deposits are steady, not the week payroll bounces. In the Federal Reserve’s 2025 survey, 43 percent of employer firms applying for loans, lines, or cash advances sought a business line of credit, and 45 percent of line applicants were fully approved, 31 percent partially, and 24 percent denied. SBA loans and lines had the highest denial rate of any product at 40 percent. Applicants at small banks were fully approved most often, 57 percent of the time.

Bring the documents a receivables lender works from:

1. Twelve months of deposits by payer, matched to invoices.
2. A receivables aging by payer, with disputed trips and appeals listed separately.
3. Each broker and facility agreement, flagged at the payment, offset, and assignment sections.
4. Your Medicaid enrollment approval, plus the bank account your Medicaid payments go to.
5. A 13-week cash forecast showing the low weeks and the draw you expect.

Keeping the borrowing base honest

A borrowing base certificate is only as good as the receivables report behind it. In HealthRide, each invoice carries its own status (outstanding, paid, or past due) and a due date taken from that payer’s terms, and incoming payments are matched to their invoices. The past-due list shows which payer to call before the bank asks. See invoicing.