Tarun Katiyar, Principal Consultant, Hospaccx India Systems
Funds Syndication in a nut shell: A syndicated loan is one that is provided by a group of lenders and is structured, arranged, and administered by one or several commercial banks or investment banks known as arrangers. In other words, it is a way of arranging funds for an individual (Borrower) by a group of people (Lenders)
How can any healthcare set-up benefit from it?
Even a small health care center or a diagnostic center can raise the fund through fund syndication and the best part of it is that they find active partners in terms of investors who can directly or indirectly support the center in increasing the revenue. Fund allocation purely depends on the need of the borrower.
What kind of healthcare centres will be able to avail this service?
All kinds of healthcare centres ranging from a small nursing home to a chain of diagnostic centres, day care centres, corporate hospital, chains of clinics etc. will be able to avail this service.
What are the criteria a borrower should fulfil in order to be eligible for funds syndication?
The borrower should have a self-sustainable business with a good brand name in that particular region for the last 5-10 years.
How is it different from loans of financial institutions or term loan?
Loans from financial institutions require one to go through tedious procedures and is time consuming. Moreover, the financial institutions offer the loans based on your credit history and other related details.The most important part is that the bank is only partner in profit but when it comes to fund syndication they are partners in the loss also as they are partner in the business. Funds Syndication is more prevalent in US and European markets.
What are the merits of syndicated funds?
Syndicated funds offer significant merits over other investment options.
- Less paper work required as in a Loan from Financial Institutions, No tedious procedures involved.
- Financial risk involved is limited as it is equally borne by all the investors.
- Less risk involved when it comes to the borrower as risk is divided among all.
- Best merit is that the funder also become a promoter for your business and directly or indirectly he increases your revenue. Best example is when the investors are a group of doctors for a diagnostic center – Patient referral becomes easy, thereby indirect inflow of patients from the investors is seen.
What are the demerits of syndicated funds?
As all the other loan/investment related options have certain demerits involved, Funds syndication is no different either. But, it outweighs the other option.
- As the investors are a group of people, they tend to influence decision making in the organisation.
- Transparency is always an issue in such cases.
- The client should have a self-sustainable business module.
Why is this required for smaller healthcare set-ups?
Sometimes smaller set ups/organisations do not have enough financial credentials to be presented before the bank, which makes it difficult for them to secure sufficient funds for their needs. Whereas, funds syndications do not have any such issues to deal with.They can use their capex in expansion or marketing of their services.
Any small diagnostic center, polyclinic, nursing home or a day care center which is looking forward expansion in massive mode. Fund syndication is a useful tool for them to reach the destination.
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