Owners and operators of healthcare facilities need to recognize and avoid failed funding strategies that effectively place the cart before the horse in a tight credit market, one expert advises.
Jeffrey A. Davis, chairman of Chicago-based Cambridge Realty Capital Companies, observes that financing for healthcare providers will continue to be limited over the next 24 months, with local banks and HUD the primary sources for funding.
By necessity, Davis believes healthcare borrowers must focus on operations and on improved communications with lenders. He offers this advice to borrowers:
Understand your financing needs. Before starting a dialogue with a lender or financial intermediary, understand the type of loan you’re seeking, i.e., construction, permanent or rehab / expansion.
Understand your lender / investor’s needs. Remember that lenders are motivated to get your loan done if it is realistic. But it’s up to you to qualify for a good loan. The more you know and understand and are able to articulate, the better impression you will make with the lender.
Have realistic timing goals. Realize that even a fast-moving financing transaction will take 60 to 90 days. To make sure that your loan is on the fact track, make sure that all materials are assembled in advance and ready to present upon request.
Research the alternatives and choose the best lender / financial intermediary to deal with. Many borrowers do not feel comfortable dealing directly with lenders and choose to have a consultant / financial intermediary represent them. To insure a better chance for success, those who do deal directly with lenders need to make certain they are talking with a decision-maker and not a lower level loan officer.
Thoroughly understand your facility. Understand that you are the expert where your facility is concerned. And that any lender’s questions about your facility are fair game. This includes the number of units, current rates, expenses, current census, census breakdown, and so forth. The more you know and understand, and are able to articulate, the better impression you will make with the lender.
Have accurate data. Providing inaccurate data will quickly disqualify a borrower. Review in advance all statements and census data and assemble all legal data. Make sure you have reviewed in detail all current debt. If you will be paying off the debt, make sure that debt is open to prepayment.
Process lender / investor requirements quickly. More than half the responsibility for a prompt loan closing lies with the borrower. When a lender requests updated numbers or additional data, it should be delivered promptly. Have three years’ historical data up to speed and copied, and ready to present. Also, have enough area data put together so that your lender can be sufficiently knowledgeable about the context of your loan.
Be open-minded during your financing discussions. Borrowers who think they have all the answers will usually wind up turning off most lenders, who are the real experts. It’s always a good idea to respect your lender’s expertise; if you can’t, find another. Inquiring questions are usually accepted and even encouraged by lenders.
Remember that talk doesn’t make deals. However, a quality presentation with excellent material does. Successful applications are all about quality paperwork.
Court long-term relationships. The first loan you make with a lender can be the beginning of an important long-term relationship. Be prepared to listen and learn.