Dive Brief:
- After nearly disappearing in the wake of the stock market crash in 2008, capital financing for healthcare projects has gradually come back and is now flowing steadily.
- Lenders include not only commercial banks but also real estate investment trusts, public lenders, private equity firms, life-term companies, pension funds and commercial-backed mortgage securities.
- While rates on loans are falling as competition rises again, lenders are still cautious about backing new development deals for what they consider to be risky projects, hoping to avoid what one termed "the overbuilding frenzy of the late '90s."
Dive Insight:
It appears that lending for healthcare capital projects has been restored to almost the level it was until the 2008 crash, but with a catch: While newcomers to the market might have had a better chance of finding financing for development projects seven or eight years ago, these days lenders are far more likely to do a deal with a large healthcare operator with many properties already in existence.
Getting past this resistance can be quite a challenge, lenders concede. For newer or smaller healthcare operators to succeed in capturing financing, they'll need to do a very thorough job of proving that they've covered all of their bases, including how they'll capture and grow market share in the face of competition, how they differentiate themselves and how they'll prove they have outstanding outcomes. Demonstrating that they are innovative and have technology to support growth is also helpful, lenders say.