Your financing sources

The question now is where to go to get the financing arranged. Many sources actively finance start-up ASCs, and many more would like to finance start-up ASCs. Knowing which ones are the ones to go is the key to a successful financing experience. The finance companies (and finance sources) fall into several categories:

  • Captive finance companies. They’re an integral component of the business proposition of the vendor. They’re not an outsourced entity or service — they’re a core profit center of the company. In many instances, they focus their financing on equipment only. Some have stretched and learned the art of project finance, but sometimes they actually outsource that portion to others. Some of them they will only finance their own equipment, but others will finance equipment from others as well as their own, including (FINANCING) the entire project.
  • Vendor-based finance companies. They’re focused on financing equipment and products for companies that manufacture and distribute said equipment and products. The nature of the relationship is usually, but not always, contractual and they all strive to get 100-percent compliance from the vendor’s sales staff when financing is required. Financing projects from soup to nuts is not usually core to one of these relationships, although several are quite successful at it.
  • Banks. Many regional and national banks have developed expertise in providing financing to healthcare enterprises, typically stemming from the traditional banking relationships they have had with local hospitals, as well as physicians and physician groups. They can be productive for you as a solution, but will likely require (YOU TO PROVIDE) guaranties and (INSIST THAT) all of your banking be done through them — not necessarily a bad thing, but you just need to understand what the ground rules will likely be.
  • Independent third-party leasing companies (direct lender). Third-party finance companies come in two basic flavors — ones that are part of a larger organization and are their own funding source, and ones that rely on selling off transactions to other funding sources. I’ll discuss this latter group in the next section. Direct lenders don’t have to go outside funding sources to ensure that they can finance your project. They do, of course, have to go through the credit committee process to get your project approved for financing. Many of them have expertise in healthcare and specifically in financing start-up ASCs. These can be good experiences if you align yourself with the right third party lender for you.
  • Independent third-party leasing companies (indirect lender). The nature of these third-party financing sources is that they sell off virtually all of their transactions. The successful ones have established relationships with several funding sources and can be a very effective solution for you. They often have very good healthcare experience and expertise, including financing start-up ASCs.
  • Brokers. Brokers of transactions don’t control the funding sources, although many have established relationships with some highly qualified lenders. Brokers are viewed as a last resort for trying to get a transaction financed — not always a deserved characterization. They earn a fee from lenders for successfully placing the transaction with them. Not all ultimate lending sources accept transactions from brokers and that can be a limiting factor when working with this category (OF FINANCING SOURCES).
  • Advisors and consultants. Although perceived as similar in nature to brokers, advisors and consultants will act as your “chief financing officer” and represent you to the funding community. They, like many of the brokers, usually know the most active debt lenders in the market and what their levels of interest are for a given type of transaction. They can be paid like brokers, but are also engaged directly by you as the(IR) client and then take no fees from the lender for a successful placement. The advantages for you, especially when you pay them directly, are that you control who they solicit for financing, you add whoever you want to the mix of financing sources (the advisor will not care, as long as he(/SHE) is getting paid directly by you and if the source is qualified) and you can usually save money on the fees. Here, too, there are certainly a few that are well experienced in healthcare, as well as in financing de novo ASCs.

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