A medium-sized medical practice needs short term loans a few times per year when available cash is less than needed for operations. It can either take multiple single payment loans each year or arrange for a five-year line of credit. Discuss the pros and cons of those choices.

What will be an ideal response?

Single payment loans are simple to execute and may have lower overall interest and fee payments than a line of credit. The disadvantage is that if the medical practice underestimates its short term borrowing needs, then it will need to take out another single payment loan. A line of credit would let the practice borrow as needed and repay as funds become available. Once set up, the line of credit can run for years without the practice's owners having to negotiate loans.