By Jonathan Chen

When high-profile banks in California and New York failed last week, forcing federal regulators to step in and guarantee that depositors could access their money, financial services companies across the nation had a choice. They could watch or they could help.  

At Nitra, our mission is to support next-generation healthcare companies and the decision was never really a choice. We knew we would help. Our team quickly put out the word that Nitra would offer credit and short-term loans so that companies impacted by the crisis could remain operational. Hundreds of companies reached out, and we are working with many of them.

The situation was also a learning opportunity, both for us and for many large medical practices, healthcare firms and healthtech companies. At Nitra, we learned that part of our role moving forward will be to offer products that provide the liquidity and security companies need to weather uncertain times. We want to give companies the tools to remain flexible and diversified, so they can keep their doors open even in the face of big challenges.

How to Operate With Confidence

There were also important lessons for doctors and practice managers who want to practice smarter management, hedge against problems and operate with confidence. That’s an important concept. Knowing that your practice can remain open in the face of a revenue slowdown, a seasonal shift in business or a banking problem means a lot fewer sleepless nights.  

There are prudent steps you can take to ensure that your business can withstand the impacts of a crisis, whether brought on by the business cycle or the financial system. But before I get to those, I want to say that we at Nitra remain confident in the banking system. Bank failures are incredibly rare, and a run on deposits is even more so. Yes, they can happen. And no, there is no early warning system. But banks have been operating in the United States for almost 250 years and the U.S. government has been insuring deposits since the 1930s. Most banks are healthy and the government has shown time and again that it will step in when needed to stabilize the system for depositors. We believe that, overall, the banking system is strong.

Having said that, preventing problems is always more efficient than untangling them after the fact. There are precautions you can take—most of them simple— to protect your company and keep it operational in a downturn. Here are some suggestions from the Nitra team that we hope will provide peace of mind:

• Use an FDIC-Insured Bank. The Federal Deposit Insurance Corporation is the part of the federal government that guarantees deposits in commercial and savings banks. At an FDIC-insured bank, the government will insure deposits up to a total of $250,000 per depositor, per account ownership category (e.g. single accounts, joint accounts, self-directed retirement accounts, etc.) per FDIC-insured bank. Not all financial institutions are FDIC insured and not all investment instruments are insured even at those that are. To see whether your bank is insured and how your accounts are covered, talk to your banker. The FDIC also has a helpline available seven days a week at 877-ASK-FDIC (877-275-3342). If you are not using an FDIC-insured bank, it may be time for a change.
• Obtain Credit Lines in Advance. Every business needs enough credit to operate in the event of a crisis that makes access to cash difficult. The amount of credit will be different at every company, but three months of operational expenses is a good general rule. Obtaining these credit lines in advance will spare you a fire drill if you do encounter a problem. By securing credit before you need it, you can pay vendors, make payroll and maintain operations even in the face of a crisis.
• Avoid Extreme Leverage. Companies that are over-leveraged can have difficulty in a downturn. Maxed out credit lines cannot provide the cash you need to operate and it can be difficult to increase credit limits with sky-high utilization numbers, especially in a crisis. A better strategy is to manage bills with a combination of credit and cash, make sure that adequate credit is always available and ensure that lines are never maxed.
• Separate Business and Personal Credit. While it is common for doctors to use personal credit to start a practice, separating personal credit from business credit should be done as soon as possible. Yes, it often takes some time, because lenders want to see a company establish a record in business before they extend credit. But it is a worthy goal. The separation can protect your personal credit and maximize flexibility, giving you multiple options to borrow if problems arise.
• Get Serious About Monitoring Credit Scores. Knowing your personal and business credit scores is just good management. Moreover, they are pretty easy to monitor, with both free and paid services available that will show you your scores and what they mean (most will give you recommendations to raise those scores as well). Your credit scores are a solid indicator of your ability to borrow. Monitoring them ensures that any problems on your credit report get fixed quickly.

The final lesson is less tangible, but no less important. Do business with organizations you trust and build relationships within those organizations. When problems occur, dealing with someone you know at a place that values your business can be a major asset. We have all dealt with faceless corporations and been routed to a call center, and that’s not the situation you want to be in when your ability to operate is on the line. You want to know that your business is in the hands of a person who knows you and cares about your business.

If you don’t have these relationships now, take the time to build them. Connect with your service representatives. Chat with your vendors. Ask their advice and take action to show that you are listening. If you do have a problem, the people who know you will rush in to help, just as Nitra did in response to the bank failures. Instead of weathering a crisis alone, you will have a team working on your behalf—and that makes it much easier to operate with confidence.

Jonathan Chen is the founder and CEO of Nitra.