It reaches a point where a healthcare organization wants to expand to get more clients and markets. However, this move risks losing majority ownership of the brand, especially if you don’t have enough capital to finance the expansion. There are funding options you can pursue if you aren’t ready for a full recapitalization or any move that will tamper with the organization’s structure. Such options include Community Development Funding Institutions Fund, which can offer healthcare financing. This type of debt financing has the following benefits.
Majority Ownership
Like any other business, healthcare organizations have critical decisions required for success. However, you need a team focused on the organization’s vision and mission for success. Debt financing during expansion will allow you to retain majority ownership even if you partner with like-minded organizations. Retaining majority ownership comes with the benefit of voting and election privileges, which means you have control in decision-making. In addition, most owners get consistent performance updates, which can enable the growth of the healthcare organization.
Clear Managerial Structure
Debt financing from healthcare-focused lenders can save a healthcare organization from managerial issues that can arise with a merger. Such moves during expansion can unite two organizations, making employees and managers compete instead of work. As a result, confusion can arise due to the different factions.
Improved Profitability
Expansions and de novo projects are expensive and can affect an organization’s profits. Depending on your healthcare organization’s goals, debt financing can be a viable option because of tax deductions. Such debts are classified as business expenses, meaning the principal amount and interest payments may be deducted from your health organization’s income taxes. In addition, this financing option can save you from expensive debt 1https://www.investopedia.com/ask/answers/032515/what-difference-between-cost-debt-capital-and-cost-equity.asp , which affects cash flow. As a result, the organization will experience improved profitability.
Efficiency
A healthcare organization’s expansion enables efficiency between its branches. This benefits both the clients and the organization itself. To begin with, the clients can get services from anywhere because the branches can collaborate without too much paperwork. It also saves the clients on the cost of medical care because they will be dealing with a single entity. As for the organization, this efficiency will reduce the cost of operation because the branches can share some resources.
Maintaining Quality of Service
Expanding without mergers or buyouts will help the healthcare organization maintain the quality of its service. This is because it will only open new service delivery centers instead of joining other organizations. As a result, the healthcare organization will create a balanced team focused on a common goal. Additionally, such expansions lead to more training for the staff, which will ensure better services to the targeted market.
Expansion is essential for a healthcare organization because it benefits the targeted market. However, the cost of doing so may be too high for the organization. And options like buyouts or mergers won’t be favorable because they will disrupt the organization’s structure. Options like healthcare financing 2https://www.sciencedirect.com/topics/nursing-and-health-professions/health-care-financing from health-focused lenders are arguably the best option because it comes with the benefits you have read about in this article.
Additional resources and citations
- 1https://www.investopedia.com/ask/answers/032515/what-difference-between-cost-debt-capital-and-cost-equity.asp
- 2https://www.sciencedirect.com/topics/nursing-and-health-professions/health-care-financing