CASE STUDY
The Client:
A private equity-sponsored healthcare provider delivering medical services and equipment across distributed care settings including physician offices, hospital facilities, and patient homes, the company operates in the evolving healthcare delivery landscape where services increasingly occur outside traditional hospital environments. Under private equity ownership with a clear growth mandate and capital to support aggressive expansion, the business had built a scalable platform deploying medical equipment and care services across multiple locations and care settings. The company’s equipment-intensive business model requires substantial capital investment in medical devices that generate recurring revenue through utilization at third-party locations, creating an asset-light operational profile from a real estate perspective but significant equipment capital requirements that must be continuously funded to support growth and market share expansion in competitive healthcare markets.
The Challenge:
The high-growth healthcare provider needed additional liquidity to fund continued expansion and equipment deployment, but faced a collateral challenge that would stop most traditional lenders. The medical equipment securing any potential financing was dispersed across third-party locations—physicians’ offices, hospital facilities, and patient homes—rather than being consolidated at company-owned facilities where lenders could easily monitor and control assets. This geographic dispersion meant the equipment was essentially unsecured from a traditional lending perspective, as the company lacked physical possession and traditional asset control mechanisms that equipment lenders rely on to protect their collateral position. Conventional lenders would view this scattered equipment deployment as prohibitively risky, unable to assess asset location, monitor utilization, or execute on collateral recovery in a default scenario when equipment sits in hundreds of third-party locations beyond the borrower’s direct control. Without a lender willing to underwrite based on business model viability and cash flow generation rather than traditional collateral control, the PE-backed healthcare provider would struggle to access the non-dilutive capital necessary to fund growth without requiring additional equity contributions from the sponsor.
Solution:
First National Capital recognized that innovative healthcare delivery models require innovative financing approaches, and that strong private equity sponsorship combined with compelling growth trajectories can justify lending against assets that traditional secured lending criteria would reject. FNC got comfortable with the company’s growth trajectory and business story, conducting diligence on the healthcare service model, revenue generation mechanisms, and equipment utilization economics to understand that despite the dispersed collateral, the underlying business generated predictable cash flows that supported debt service. First National provided approximately $1.8 million in sale-leaseback financing to monetize existing equipment and inject cash back onto the balance sheet, immediately improving liquidity without requiring the company to reduce equipment deployment or scale back growth initiatives. Critically, the financing was structured as covenant-free, avoiding the restrictive financial covenants that could constrain operational flexibility during rapid growth, and provided fixed-rate terms that eliminated interest rate uncertainty and ensured predictable payment obligations. The non-dilutive capital structure meant the private equity sponsor could fund growth without additional equity contributions that would reduce returns, preserving sponsor IRR while maintaining growth momentum. First National worked collaboratively alongside the private equity sponsor throughout the process, ensuring that the financing structure considered both the firm’s return objectives and the company’s operational needs. This flexible financing partnership enabled the healthcare provider to continue aggressive equipment deployment and market expansion, access growth capital that traditional lenders couldn’t provide due to collateral concerns, and maintain the liquidity necessary to capitalize on the substantial opportunities in distributed healthcare delivery.
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