Debt, not equity: How practices can fund growth and keep control

For physician practices that want to expand without giving up control, cash-flow-based debt can provide growth capital without issuing equity, surrendering board seats or adding terms that interfere with clinical decision-making.

That approach, along with asset-backed credit lines tied to accounts receivable, equipment or real estate, is often the cleanest route for profitable midsize groups with solid EBITDA, according to John Pack, vice president of health care finance at Mitsubishi HC Capital America.

Physicians Practice: What’s the cleanest way to fund growth without giving up control of your practice?

John Pack: The cleanest way is usually cash-flow-based debt, traditional or private credit. It’s best for profitable midsize practices with solid EBITDA. No equity is issued, no board seats are given up, and there aren’t covenants tied to clinical decision-making. You have a predictable repayment schedule.

Another option is asset-backed credit lines, using accounts receivable, equipment, or even real estate.