Case Study

Home Healthcare Agency Funds Multi-State Expansion

doctor-563428_1280

 
Situation

A home healthcare hospice company was successfully operating in Oklahoma and Kansas and wanted to expand operations to Missouri. They were currently operating in Kansas City, KS and expanding to the Missouri side of the Kansas City metro would allow the company to grow the customer base without needing to dramatically increase staff. This presented a unique opportunity to grow and increase profitability.

 

Challenge

The start-up of new home hospice operations is a major financial undertaking. A company must obtain state and federal certifications that take 18-24 months. During that time, the company must perform services, but cannot bill for services until the certifications are received. At that point, it cannot bill retroactively for services performed, only going forward. So, to launch a new facility typically requires at least a $1 million injection of working capital that cannot be recovered.

 

The company needed $2.1 million to fund start-up operations in Missouri, provide additional working capital to its Kansas operation, and to refinance high-priced, short-term existing debt. There was less than $150,000 in collateral to secure a loan.

 

Solution

The company was referred to VITAL by a lender that was unable to meet its needs, and knew they needed strong expertise finding a customized credit solution. VITAL identified a partner lender that saw the company’s excellent cash flow and was willing to make a loan guaranteed by the SBA to compensate for the almost complete lack of collateral. The company received a $2.1 million SBA 7(a) loan.

 

The Result

The company used the SBA loan to successfully launch Missouri operations, and continue to grow the Kansas operation exponentially. The lender recognized that this was a very successful company with high profits and high growth potential. It was a company they wanted to form a long-term relationship with, despite the collateral position.

 

In addition to the loan, the company used the lender for seven-figure sum depository services and insurance services. The lender sold the guaranteed portion of the SBA loan and generated more than $150,000 in noninterest income, and is earning 1.5% higher interest on the retained portion versus a fully-secured loan.

 

Interested in learning more about SBA and USDA guaranteed loans? Check out our free e-book, Your Guide to SBA and USDA Lending.
Get the Free E-Book