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A Hospital Finds Best Funding Solution Through Trial And Error

Question: When is a business loan not a* After almost six months, hospital
sufficient strategy to meet the workingmanagement was in the exact same cash flow
capital needs of a hospital or othersituation they were in prior to their
healthcare provider? Answer: When theaccepting  the  asset-based  loan.
provider needs to improve its cash flow, but
cannot afford or chooses not to increase its* The asset-based bank line was insufficient
debt capacity...and/or the time constraintsfor their needs due to the bank's
and the needed amount of capital cannot benon-realistic and significantly "undervalued"
adequately served by the inherent limitationsvaluation of the assets owned by the
and  delays  in the loan application process.hospital.
While loans are a viable and traditional part* The bank was closely monitoring the
of the working capital strategy of hospitalshospital's accounts receivable (a significant
nationwide, they are not the only fundingasset in the pool) and was quick to
vehicle available, nor are they necessarilydisqualify that collateral once the aging
the best suited option for a healthcarereached 90 days. Consequently:o The funding
provider's growth, expansion, and, in someline at that point became dependent on the
cases, healthcare financial survival. Thehospital accounts receivable paying in 90
following case study clearly exemplifies howdays or less.o The line became "maxed out"
a hospital found its most effective fundingand once again meeting daily cash
solution  by  trial  and  error.requirements  became  a  challenge.
The California-based hospital applied for* Hospital management realized that the
medical accounts receivable funding with Sunsignificantly higher valuation of receivables
Capital HealthCare, Inc. (SCH), whileby SCH as well as a longer eligibility period
simultaneously applying for an asset-basedprovided the most appropriate solution to
line of credit. In the initial discussions,funding  their  financial  requirements.
hospital management indicated that their need
was strictly improved cash flow and that theyUsing medical accounts receivable funding,
viewed medical accounts receivable funding asthis capital-strapped healthcare institution
their funding method of choice. It wouldquickly put itself in a stronger cash
provide them with a predictable and steadyposition. They were able to create new
cash flow stream based solely on theirservices and procedures, thus increasing
hospital accounts receivable and the amounthospital revenues, as a direct result of this
of funding would not be limited by theworking capital strategy. In addition,
hospital's asset pool being evaluated by abecause SCH's highly experienced owners know
bank at "fire-sale" prices. However, afterthe healthcare business, not just fund
SCH presented a letter of intent thathealthcare businesses; the SCH team was able
outlined the terms and conditions of theto assist hospital management and its
transaction being offered, hospitaladvisors with operational counsel that
management instead chose to execute ancontributed to the healthcare providers'
asset-based loan being offered by a largefinancial  survival  and  subsequent  growth.
regional lender, largely due to their
inability to move away from the comfort-zoneIn less than two years, a traditional bank
of  their  traditional  financial  mind-set.loan product was provided for the hospital
that now is a very financially strong medical
Less than six months later, hospitalfacility. Quoting the hospital's CEO,
management returned to SCH requesting another"Without the help of Sun Capital HealthCare's
accounts receivable funding proposal in orderaccounts receivable funding program, we never
to secure the level of capital andwould have reached a level of financial
flexibility they required. Here are thehealth that enabled us to qualify and
reasons the hospital gave for making theappropriately benefit from a bank's
switch  to  accounts  receivable  funding:traditional financing facility. Thank you,
Sun Capital HealthCare, Inc.



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