Healthcare Business Lending in Houston

Houston practices get paid on a cycle that moves with the energy economy, and that is the single thing a national underwriter is most likely to miss.

In most of the country a practice's payer mix is reasonably stable year to year. In Houston it is not. A large share of the commercially insured population here is insured through energy-sector employment, directly or through the service and supply companies around it. When that sector contracts, coverage follows: commercial claims fall, self-pay and high-deductible balances rise, and collection slows. The 2015 and 2016 downturn and again the 2020 collapse both show up in practice receivables across the metro, with a lag of roughly one to two quarters after the layoffs.

A lender reading a Houston practice's two most recent years without knowing that can draw the wrong conclusion from a soft stretch. Our job as a broker is to put the cycle in front of the right funding sources, the ones that read a Houston file as cyclical rather than deteriorating.

It favours products that flex with revenue over products with a fixed payment that assumes a flat year.

A fixed-payment term loan sized against a strong year is the wrong instrument for a practice whose collections move with a commodity cycle. The payment does not know the cycle exists. A revenue-based product that takes a share of deposits moves with the practice: it costs more in a strong quarter and less in a weak one, and that is precisely what a cyclical collections pattern needs.

A line of credit held and undrawn does similar work for a different reason. It exists so that a two-quarter lag between a layoff round and the receivables effect does not become a payroll decision. The practices that handle a downturn best in this metro are usually the ones that arranged the facility while the cycle was still up.

Meeting any of this does not guarantee approval, and no one reviews terms before a lender has reviewed your file.

It is the closure risk worth planning for here, and it is more expensive than most owners assume.

Hurricane Harvey in August 2017 is the clearest case. Practices across the metro lost weeks, not days: flooded ground-floor offices, destroyed imaging and dental equipment, and in some cases paper records that could not be reconstructed. Flooding reaches practices well outside mapped flood zones, which is why the exposure is routinely underestimated.

The financing consequence has two parts and the second one is the one that gets missed. The first is replacement: equipment, buildout and records. The second is the revenue hole, which arrives thirty to sixty days later when the billings that were never generated fail to collect. Property insurance addresses the first. It generally does not address the second.

A line of credit arranged before a season covers the gap between the closure and the insurance settlement, which is frequently months. Equipment financing is often the cleaner route for replacement, because it is secured by the new equipment itself rather than against a practice that has just lost a quarter.