Operating a nursing home can get challenging when payors such as Medicare don’t remit what they owe in a timely manner. Unfortunately, this is common with the government health insurance program for older Americans. The delays can get so long and the need for cash to keep the nursing home running so great that more administrators are turning to alternative forms of nursing home financing to get by. Before exploring what those are, consider what a lender might look for when you apply for nursing home financing.
Possible Lender Criteria
Some lenders may require you to put up some form of collateral before granting a loan to help with nursing home administration costs. You may be able to avoid this by showing a positive profit and loss statement, a good business credit score, and a long banking history. Collateral provides the lender with something it can immediate liquidate and sell for cash if you default on the loan.
A lender will probably want to see that your nursing home has at least some working capital. That means you have enough liquid assets as compared to your short-term liabilities. Many lenders consider the ability to balance working capital with short-time liabilities to be the key to success.
Lenders are most interested in the big financial picture and will request to see documentation to prove financial responsibility and credit worthiness. Some of these documents could include bank statements, tax returns, and copies of debt agreements with other lenders.
Possible Sources of Nursing Home Financing
The microloan is a government program offering business loans of up to $50,000 during the initial start-up and expansion phases. This could be ideal if you own a chain of nursing homes and plan to open a new one. You will need to offer a personal guarantee of payment and possibly collateral as well.
You might consider a Small Business Loan if you operate a for-profit nursing home. You should have some equity in the healthcare business and have used other sources before applying.
Bear River Financial is available during regular business hours to answer additional questions.