Commercial Health Care Lending Expected to Increase in Third and Fourth Quarters

A survey conducted by the Dun & Bradstreet Credibility Corporation in association with Pepperdine University indicated that almost one third of all respondents planned to seek out new financing during the latter half of 2012. This represents a significant increase over previous years and marks a departure from the conservative borrowing practices prevalent throughout the marketplace in recent years. Almost 6,000 businesses were tapped to participate in the survey, which was conducted from January to March of this year.

The rebirth of optimism in the health care sector

Many companies have adopted a wait-and-see attitude toward expansion and growth during the recent economic downturns, especially in the health care and medical fields. As a general rule, most private practices and medical offices have put expansion plans on hold and reduced discretionary spending and borrowing during the worst of the economic crisis. The Dun & Bradstreet survey results may represent the rebirth of optimism in the health care field. By using their current real estate holdings and office buildings as collateral, physicians and health care administrators can expand into new areas, purchase new equipment or renovate their current offices to provide more comfort and services to their patients.

More options, but requirements remain high

Loosening purse strings and the consequent expansion of the financing marketing during 2012 are likely to create higher demand for lending arrangements throughout the health care industry. However, stringent requirements for these business loans are expected to remain in place as banks and lending institutions try to manage risk by limiting their exposure in the financial marketplace. In order to obtain financing for renovations, equipment or new office space, medical and health care businesses will need to provide a significant amount of documentation along with the business loan request. Typical commercial loan requirements include:

• Collateral – This must be documented and may consist of real estate, marketable securities, medical buildings, equipment or other valuable property. In most cases, the equity accrued in the office space currently occupied by the health care facility is used as collateral for the expansion or renovation loan.
• Cash flow – Detailed business records for the last two or more years will be required in order to establish the ability of the borrower to repay the funds in a timely manner. A positive cash flow is usually necessary in order to acquire funding from traditional sources.
• Credit – The credit history of the health care organization and any guarantors will be considered during the loan evaluation process.

These factors will have a significant impact on the interest rates and terms offered by lenders and the success or failure of the business expansion loan request.

CNF Exchange can help medical offices and physicians in private practices obtain the funding they need. Our innovative capital and finance funding solutions provide additional avenues for health care companies to connect with lenders. As the economy continues its recovery, we'll continue to provide the most advanced financing options for businesses in the health care field and many other areas of industry.

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