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Long term debt alternatives for hospitals - Article Example

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College
Article
Finance & Accounting
Pages 3 (753 words)

Summary

Hospital financing has never been so easy. With lots of options to choose from and government’s encouraging policies to back upon, the financing part of the hospital has
become organized and comfortable for all the involved parties…

Extract of sample
Long term debt alternatives for hospitals

Hospital financing has never been so easy. With lots of options to choose from and government’s encouraging policies to back upon, the financing part of the hospital has
become organized and comfortable for all the involved parties.Once the proposed hospital’s capital has been decided, the desired method of the capital funding needs to be determined. In the US hospital industry, approximately 50% of the assets are financed through equity and 50% through debt. Long term debt financing is available from at least four major sources: tax-exempt revenue bonds, Federal Housing Administration insured mortgages, public taxable bonds, and conventional mortgage financing.To obtain debt financing, hospitals must maintain a certain level of financial performance as measured by various ratios of assets to liabilities or income to expenses.The two prominent long term debt alternatives for hospital are:1. Conventional mortgage: A mortgage in which the interest rate does not change during the entire term of the loan and that is not insured or guaranteed by the government. Interest rate is the rate which is charged or paid for the use of money. An interest rate is often expressed as an annual percentage of the principal. It is calculated by dividing the amount of interest by the amount of principal. Interest rates often change as a result of inflation and Federal Reserve policies. For example, if a lender (such as a bank) charges a customer $90 in a year on a loan of $1000, then the interest rate would be 90/1000 *100% = 9%. ...
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