Bankers are structured business institutes and will have well-laid protocols before lending loan for a hospital project. It can be purely a hospital loan or for an equipment loan, they are instructed to follow the process to fulfil the criteria before loan approvals.
What are the objectives of Banks?
Their main objectives are to make profits while safeguarding their money. As the money belongs to the general public, banks are governed by the central & state government to safeguard the interest of the public. Hence there is little scope for deviation while they lend loan for any project.
The main criteria they will consider for easy sanctioning of loan are
- Collateral to the tune of 110% of the debt amount.
- Debt Service Coverage Ration of at least 1.5
- The sensitivity of the project
What are the rationale to sanction loan amount to Hospital Project?
1 The rationale behind such protocols is very much logical. The collaterals will give a 100% guarantee on the loan amount and additional expenses will be covered in the remaining 10%. So even the project goes bankrupt, the hospital will get their money back.
2If the hospital is doing good service and generating good revenue, is it sufficient to repay the hospital loan? The ration of 1.5 (DSCR) means that the hospital is just doing really good so that the employees are drawing sufficient salary and still they will have sufficient funds to repay the instalment as agreed on Detail Project Report / Business plan of the hospital.
3The sensitivity of the hospital is very critical as it explains how the financial health of the hospital behaves if there is a variation in our assumptions. A slight decrease in the revenue and increase in the expenses or both. If the indicators still tolerate the variations, then bankers will feel safe about the financial health of the hospital.
Why business assumptions are important?
The most challenging part of the exercise is the assumptions on patients and service numbers while deriving the detail project report. When asked, one is supposed to justify those assumptions. We at Macula Healthcare work on systematically on the financial feasibility. We justify our assumptions based on the market input or based on the promoters input. It may so happen that the assumptions may not be just sufficient to make the project financially feasible. In such a case, we come out with the strategies to cover the gap and justify accordingly.
As Hospital Consultants, we will be able to give rationale to all the assumptions considered for project feasibility. We will also structure the loan repayment plan so that bankers will know clearly how much they will get and what is the total margin banks make.
We basically know what bankers look inside the project report. We draft the report in such a way that they will take the least time to either accept or reject for hospital loan.
Role of Hospital consultant?
It is very crucial to engage Hospital Consultant to do this exercise of working on your dream project. At Macula Healthcare, we are group of healthcare professionals from various background working on a common objective of making a sustainable hospital project first and a profitable one later.
Hospital consultants will drive the project and brings in expertise from across the domain that includes CAs, Biomedical Engineering Team, Architects and Civil Contractors, Clinicians and Hospital Administrators. All these inputs becomes the great resource to derive the cost of the project and operational expenses.
At the end of the assignment, the promoters will be able to take necessary decision of venturing into hospital project or defer to prepare oneself and wait for the right time.
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