Debt can fund growth, equipment or an acquisition without giving up ownership. Banks lend to businesses they can understand and that show reliable cash flow. Preparing in advance improves both the chance of approval and the terms.
What lenders look for
- Cash flow: enough to cover loan payments with room to spare. Lenders often look at the debt service coverage ratio.
- Consistent earnings: stable or growing profits over at least three years.
- Quality reporting: accurate, timely financial statements, ideally reviewed by an outside CPA.
- Collateral: equipment, receivables or real estate that can secure the loan.
- Management: a team and plan that give the lender confidence in repayment.
How to prepare
- Produce three years of financial statements and tax returns, plus year-to-date.
- Clean up receivables, especially old balances that are unlikely to be collected.
- Separate personal and business expenses.
- Prepare a short plan explaining how the loan will be used and repaid.
- Build a relationship with a bank before you need to borrow.
Healthcare-specific considerations
Lenders will ask about payer mix, concentration with any single payer, reimbursement trends and the practice’s dependence on individual physicians. Clear answers to these questions reduce perceived risk.
Debt, equity or both
For some owners, a capital partner is a better fit than debt, or the two can be combined. Read about majority recapitalizations or talk to our team about the options.