Capital financing options for group practices.
Group practices that are looking for capital partners need to demonstrate that they have the necessary management capability to operate a successful business capable of repaying the debt. Two basic types of debt financing are available to group practices: fixed-rate financing and variable-rate financing. Fixed-rate financing, the more common method, involves borrowing a specific amount of money and then paying off the debt in principal-and-interest payments, much like a fixed-rate mortgage. Variable-rate financing, on the other hand, involves obtaining a letter of credit from the lender itself or independent guarantor to secure a loan. The variable-rate method is more efficient and flexible, because the notes secured by the letter of credit can be rated independently and sold into public capital markets like short-term, variable-rate paper. Both types of financing can require the personal guarantee of all physicians in the group practice.
Galtney
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Vista Capital Corporation, Houston, Texas, USA.
D002202:Capital Financing / Q000379:methods* / Q000458:organization & administration; D005653:Fund Raising / Q000458:organization & administration*; D006123:Group Practice / Q000191:economics* / Q000458:organization & administration