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Better Than a Bank?

When it comes to lending, finance companies are often less demanding and more understanding than banks.

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This story appears in the April 2006 issue of Entrepreneur. Subscribe »

About six years ago, MedHelp Inc.in Baltimore needed new software to upgrade the billing and medical assistance qualification services it provides to hospitals and physicians' practices. For financing, MedHelp's software supplier suggested a local finance company with which it had worked on other deals. Though MedHelp had a well-established relationship with a bank, the company's partners felt certain their bank would have misgivings about financing this particular asset. "I doubt very seriously we could have gotten funding for the software from the bank because software loses value so quickly," says Ian Johnson, MedHelp's vice president for operations.

One big perk of not getting financing from a bank: Johnson and his partners would not have to personally guarantee the loan. "Banks tend to want everything to [secure] a loan," he says. "The bank would have wanted mortgages and everything else."

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