Ambulatory Surgery Center Financing: What Physicians Should Know
Ambulatory surgery centers, commonly known as ASCs, can require significant capital to start, acquire, expand, or operate. Physicians and healthcare professionals may need financing for real estate, construction, medical equipment, working capital, an existing ASC acquisition, or other business investments.
For physicians considering ambulatory surgery center financing, understanding the different financing needs and available options can help when planning a new project or evaluating an existing center.
Here are several important things physicians should understand about financing an ambulatory surgery center.
1. What Can Ambulatory Surgery Center Financing Be Used For?
ASC financing may potentially be used for a variety of qualifying business expenses and investments.
Depending on the financing program, funding may potentially be available for:
- Purchasing an existing ambulatory surgery center
- Starting a new ASC
- Purchasing commercial real estate
- Constructing or renovating an ASC
- Purchasing surgical equipment
- Funding working capital
- Expanding an existing surgery center
- Refinancing certain existing business debt
The specific uses permitted will depend on the financing program, lender, transaction, and borrower qualifications.
2. Financing an Existing Ambulatory Surgery Center Acquisition
Physicians may consider purchasing an existing ASC rather than developing a new facility from the ground up.
An acquisition can involve several financial components beyond the purchase price.
These may include:
- The purchase of the operating business
- Medical equipment
- Furniture and technology
- Working capital
- Transition expenses
- Potential real estate costs
When evaluating an acquisition, physicians should review the ASC’s historical financial performance, operating expenses, case volume, payer mix, equipment, and other relevant information.
Understanding the total capital requirement can help determine how much financing may be appropriate.
3. Financing a New ASC Startup
Starting an ambulatory surgery center can require substantial upfront investment.
A new ASC may require financing for:
- Real estate
- Construction
- Facility build-out
- Operating rooms
- Surgical equipment
- Technology
- Staffing
- Initial operating expenses
- Working capital
A new facility may also take time to reach its projected patient and procedure volume.
For that reason, physicians should consider both the initial project costs and the capital needed to support the center during its early operating period.
4. ASC Equipment Financing
Medical equipment can represent a significant portion of an ASC’s total investment.
Depending on the specialty and procedures performed, equipment needs may include:
- Surgical tables
- Anesthesia equipment
- Patient monitoring systems
- Operating room equipment
- Sterilization equipment
- Imaging equipment
- Endoscopy equipment
- Specialized surgical equipment
Equipment financing may allow a surgery center to acquire necessary equipment while preserving cash for other business needs.
5. Financing ASC Real Estate
Real estate can be another major component of an ASC project.
Physicians may choose to purchase an existing medical facility, acquire land and construct a new facility, or finance improvements to an existing property.
Real estate financing may potentially be used for qualifying:
- Medical office buildings
- Ambulatory surgery center facilities
- Owner-occupied commercial real estate
- Construction projects
- Facility improvements
Physicians should evaluate the real estate costs together with the operating requirements of the ASC rather than considering the property independently from the overall project.
6. Working Capital Is Important for ASC Financing
An ASC may need working capital to cover operating expenses before revenue reaches its expected level.
Working capital may help cover expenses such as:
- Payroll
- Medical supplies
- Rent
- Utilities
- Insurance
- Administrative expenses
- Marketing
- Other operating costs
Working capital requirements can be particularly important for a new ASC that is still building patient volume and establishing its revenue cycle.
7. SBA and Conventional Financing May Both Be Options
Depending on the project and borrower, physicians may consider different types of business financing.
Two potential options include SBA financing and conventional financing.
SBA financing is provided through participating lenders and includes an SBA guaranty subject to applicable SBA requirements.
Conventional financing does not include an SBA guaranty.
The appropriate option can depend on factors such as:
- The size and purpose of the project
- Borrower qualifications
- Practice financial performance
- Available equity
- Collateral
- Repayment requirements
- The lender’s underwriting criteria
Physicians should compare the overall structure and cost of available financing options before selecting a financing strategy.
8. What Do Lenders Look at When Financing an ASC?
Lenders may evaluate both the physician or ownership group and the financial strength of the ASC project.
Depending on the transaction, factors may include:
- Credit history
- Professional experience
- Available assets
- Existing debt
- ASC revenue
- Historical profitability
- Projected cash flow
- Case volume
- Business plan
- The purpose of the financing
For an acquisition, lenders may also review the financial performance of the ASC being purchased.
For a startup, the lender may place greater emphasis on the physicians’ experience, financial strength, project plan, projected cash flow, and other factors.
9. How Much Does It Cost to Finance an ASC?
There is no single financing amount or loan structure that applies to every ambulatory surgery center.
The total capital requirement can vary significantly based on whether the project involves an acquisition, startup, expansion, equipment purchase, real estate acquisition, or a combination of these needs.
Physicians should consider the entire project budget rather than focusing only on the amount needed to purchase the business or facility.
10. Preparing for ASC Financing
Physicians can make the financing process more efficient by preparing financial information before submitting an application.
Depending on the transaction, lenders may request:
- Personal financial statements
- Personal tax returns
- Business tax returns
- Practice financial statements
- Bank statements
- Information about existing debt
- Purchase agreements
- Real estate information
- Business plans and financial projections
The exact documentation required will vary depending on the lender and financing program.
Final Thought
Ambulatory surgery center financing can potentially help physicians and healthcare professionals fund acquisitions, startups, equipment, real estate, expansion, and working capital.
Because ASC projects can involve significant operating and capital requirements, physicians should evaluate the entire financial picture before moving forward.
Understanding the financing options, preparing financial documentation, and determining the total capital required can help physicians make more informed decisions when starting, purchasing, or expanding an ambulatory surgery center.
