Hospital Financing
Secure finance before starting construction
We make project reports, and through our associates do bank syndication to help you secure bank loans. Detail Project Report and feasibility study are required by the bank to process the loan applications. Hospitals are included in the Infrastructure sector and are a priority segment to lend. It is always advisable to secure finances before starting construction.
1. Tenure
Hospitals take some time to start generating cash flow and hence the loan tenure should not be less than 7 – 10 years. A shorter tenure is not advisable.
2. Moratorium
It is the time a bank or financial institute gives from the day the loan is disbursed to the time the first repayment starts. As it takes a minimum of 1 year to construct and 1 year to breakeven, 2-3 years of moratorium should be there. Otherwise, there may be issues with cash flow. Interest needs to be paid regularly from the first month of disbursement. The moratorium is on Principal not on interest.
3. Interest Rates
With the falling interest rates and limited credit offtake, suitable interest rates can be negotiated. Presently (2020) interest rates are in a range of 9 – 12 %. Even a 1% difference in interest rates will make a huge difference in the complete project life cycle.
4. Principal Repayment
Many times an equal/flat repayment is offered by Banks, this increases outflow in earlier days as the total outflow is principal repayment + interest. In Initial tenure as the principal amount is high (which reduces as we repay) the interest is also high, so with an equal/ flat principal repayment, the total outflow is higher in the start and reduces. Generally, an EMI type of structure to be preferred where the overall outflow is constant during the complete tenure. Actually an increasing monthly outflow is the best, as with time the earnings also increase and hence the repayment capability. Hospital financial feasibility.
5. Debt to Equity
Equity is the money an entrepreneur puts and debt is the loan he takes. On an ideal term, 100 % own money is good as you do not have to pay back, but as equity is expensive and most of the entrepreneurs leverage their money with borrowings, it is healthy to maintain a portion of both means of finance (debt: equity). A healthy mix for hospitals is around 40 % equity and 60 % debt. (1: 1.5)
We do not guarantee any loan but surely can do the proper documentation and presentation to help you secure finances.