Do you have the type of business plan that a lender will finance?
Integral to this part of your process is knowing what critical elements a lender will be looking for in your business plan. These critical elements include the following:

  • A cogent 2 to 3 page executive summary of the project outlining the ownership and ownership structure (including its legality), the key success factors (the “hook”) of the project, a top-level profit and loss statement, and a summary of the sources and uses of funds
    • If you are looking to raise equity, you will need to spell out a number of items that are not a part of this article, but include the following:
      • how many shares or units are for sale
      • what the price per share or per unit will be
      • what the minimum and maximum investment can be
      • what the return on investment expectations are projected to be
      • the list goes on and you need to consult with a Securities attorney
    • The sources and uses of funds should clearly state how much equity is being put into the project as equity by the owners, how much money you are asking a lender for and what its uses will be (equipment, leasehold improvements, working capital and/or real estate)
  • The balance of the plan is expected to flesh out the details contained in the executive summary (consistency between the executive summary and the full business plan is critical)
    • A description of the owners, along with their backgrounds and a summary of related experiences are absolutely necessary. People lend money to people and experienced people can get it more easily and on better terms than inexperienced people – typically, your first “deal” will be your toughest, as long as your resources and ability to generate (or raise) cash remains strong and consistent.
    • A description of the ownership structure of the business is critical – show a table of ownership if you think it will make it clearer, especially if you have overlapping and intersecting partnerships or corporations (equipment partnerships, real estate partnerships, operating entities, etc.). Far too many times I have seen confusing and intricate structures that take too long to explain or figure out. The lender will end up wondering if someone is trying to hide or mask something if the structure of the ownership interests appears to be too intricate. Your healthcare attorney is very important to this section of your plan, especially if you are promoting a new delivery model – his/her description and rationale for the model’s legality is of paramount importance for selling your plan to potential lenders and potential investors.
    • As noted, a clear and concise sources and uses of funds schedule is very helpful. It should include:
      • how much will the entire project cost
      • how much of the source dollars for the project will be in the form of equity from the owners (lenders like more equity rather than less – and you probably knew that already!)
      • how much money will need to be borrowed (lenders like to see a strong balance between equity and debt – the more equity, the less debt and that will get you the most favorable terms from a lender
      • what will the uses of all the dollars (borrowed and invested) be and how much will be used for each:
        • equipment purchases, both medical and non-medical
        • leasehold improvements, if there will be leased space
        • real estate (acquisition of an existing building or purchase of land and constructing a new building)
        • working capital (lenders tend to like all or the lion’s share of working capital coming in from the owners as equity – also, working capital is the bane of any new business and you should never underestimate your need and the source or sources to meet that need)
      • Pro forma financial projections in the form of profit and loss statements, cash flow statements and balance sheets for a three (3) to five (5) year period with the first year of the first two being shown on a month-to-month basis (an opening balance sheet is always a good idea).
      • There needs to be discussion of the other features, attributes and risks associated with the project. These ought to include:
        • Demographics of the community, including growth projections, employment, household income, etc.
        • Competition in the form of other like services and other providers in the service area
        • Managed care and other third party contracting sources, including a discussion of why will your facility be contracted with as a new service provider by these reimbursement sources
        • Any other key features or reasons describing why the project will be a success. An example is a federally designated rural market that allows for the ability of referring physicians to be investors in a project where they will derive a financial benefit in the form of profit distributions (hopefully!)

Previous Page    1  2  3  4  5  6  7    Next Page