|
    
 |
Small and Rural
Hospital Finance
Financing Options Overview
FHA Mortgage Insurance
FHA Section 242 Insured Mortgage Loan
- Program administered jointly by Housing & Urban Development (HUD) and
Health & Human Services (HHS)
- New Construction, Expansion, Renovation, Equipment, Debt Refinance
- Non-recourse
- Low Cost Fixed Rates
- Funded through Tax Exempt Bonds or Taxable Ginnie Mae Securities
- 25 Year Maximum Term
- Up to 90% Loan-to-Value
- No Maximum Loan Amount
- Broad investor market, excellent liquidity
- Estimated Timing: 9 to 12 months
- FHA has unlimited insurance capacity
- FHA relationship enhances future financing options (Section 241
Supplemental Loans)
- HUD and HHS control upon default
USDA Community Facilities Program
USDA Loan Guarantee
- Applicable to community healthcare projects for non-profit and public
entities
- 40 Year Maximum Term
- 90% maximum Loan-to-Volume
- Fixed or Variable Rates
- No Maximum Loan Amount
- 90% Net Loss Reimbursement Guarantee and Lender (10%)
- Lender and USDA approval required
- Facility must be located in a Rural Designated Area
- USDA Guarantee applies to permanent loan only, separate construction
financing required
- Low Upfront Costs
- Estimated Timing: 4 to 8 months
- Generally used for Smaller Projects (i.e. $20 million and less)
- Limited Program Size
- USDA and lender control upon default
Conventional Tax-Exempt Bonds
Enhanced (Rated) Hospital Revenue Bonds
- Bank Letters of Credit and for-profit Bond Insurance are possible
enhancement options
- Generally requires borrower underlying credit profile of “BB” or
higher
- Enhancement cost varies based on hospital’s credit profile and
transaction size
- Tax-Exempt Fixed Rate and Floating Rate options are available
- Interest rates vary by rating and term
- Estimated Timing: 4 to 6 months
- Enhancer establishes covenants and loan restrictions
- Enhancer control upon default
Unenhanced (Non-Rated) Hospital Revenue Bonds
- An option for select Small and Rural Hospitals
- Small investor market compared to other options, very limited market
liquidity
- Interest rates are substantially higher than other tax-exempt options
- Estimated Timing: 4 to 6 months
- Investor control upon default
|
|
|
 |
