What is the right financing strategy for a provider looking to scale? — in conversation with Carin Eijgenberger, Managing Director – Healthcare at ING
Capital is plentiful, but raising it is expensive, which means companies need to be strategic when considering transactions or investments.
HBI caught up with Carin Eijgenberger, Managing Director, Healthcare at ING, one of the speakers at the HBI’s conference next month, to talk about the current financing landscape for businesses looking to exit, get acquired, or grow. With high costs despite abundant capital, we discuss how companies can stay strategic in this environment.
How is the current financing environment for healthcare businesses seeking to grow, exit, or acquire?
“The current financing environment for healthcare businesses is generally pretty favourable right now. There’s plenty of liquidity available, and whilst interest rates are higher than a couple of years ago, rates are going down, so borrowing conditions are improving.
Carin Eijgenberger, Managing Director, Healthcare, ING
For early-stage businesses, equity financing tends to be the go-to since it’s a high-risk phase. Investors are often willing to provide equity finance in exchange for a stake in the company, and traditional debt financing is harder to come by in those early stages.
As companies move into their growth phase, they usually have a couple of options — either growing organically, e.g. by opening new clinics, or expanding through mergers and acquisitions. For organic growth, many businesses use capital expenditure (CapEx) facilities, which are credit lines designed to fund growth initiatives like new clinic development. Lenders will look at key financial metrics such as net debt over EBITDA to make sure the company is making strategic, sustainable investments.
When businesses are looking to expand via mergers and acquisitions, they often use acquisition facilities, which are essentially credit lines meant for buying other companies. Lenders would like to understand whether the target company is profitable, i.e. has a positive EBITDA and will also assess how the net debt-to-EBITDA ratio will look post-acquisition, factoring in any synergies — like cost savings or revenue synergies — that could come from the deal.
The financing route a company chooses really depends on their strategy, risk tolerance, and growth ambitions. Some companies might prefer a more conservative approach and stick to growing with available cash flow from operations, but that can slow things down compared to using debt to support faster expansion.”
What is the right financing strategy for a provider looking to scale?
“The right financing strategy for a healthcare provider looking to scale is one that supports the commercial strategy, the return on equity targets and risk appetite. For example, banks offer various types of loans and a range of additional financial services like payment and cash management solutions. They can tailor financing solutions to the specific operational needs of the company. However, banks have certain limits when it comes to their risk appetite. They usually cap quantum and leverage — debt relative to earnings — at around 3.5 to 4 times EBITDA, but this really depends on the size and financial profile of the company. If a provider wants more leverage, the bank will typically impose stricter conditions.
On the other hand, private credit or direct lenders typically have a higher risk appetite, which gives them more flexibility when it comes to lending. They can offer higher leverage, sometimes up to 6-7 times EBITDA, but because of the increased risk, they often charge higher interest rates. These lenders also tend to be more flexible in debt quantum or providing uncommitted credit lines for future acquisitions. With fewer restrictions compared to banks, they’re a good choice for companies looking for more aggressive financing to support growth.
Ultimately, the decision depends on how much leverage you want, your appetite for risk, and how much flexibility you need when structuring your financing — whether for acquisitions or other expansion plans.”
As a debt financier, what are the factors you look at before approving a loan?
“We start with analysing the company, where we look at, amongst others, size, geographical footprint, track record, the quality of its service offering, the reliability of its operations and experience of the management team and owners.
Thereafter we start with the financial analysis and there one of the first things we ask is what currency you need the loan in.
In case of financing for an acquisition, lenders will also look closely at the cash flow generation of the company that has been acquired and of the combination (i.e. post acquisition). If the company’s cash flow allows, they might prefer a Term Loan A, which requires regular repayments. However, if the company will need significant restructuring, they could consider a Term Loan B, which is non-amortising and means you’ll pay the full loan amount at maturity (usually 5-7 years).
They’ll also want to know how you plan to use the cash flow after the acquisition. If you’re planning to pay down debt, you might get more favourable terms (e.g. lower margin) with a Term Loan A. If you plan to pay dividends to shareholders, stricter restrictions will apply — typically, you wouldn’t be allowed to pay dividends unless the leverage is significantly reduced. If you’re planning to fund further acquisitions, lenders will need to structure the financing accordingly, especially if you’re part of a private equity-backed platform with a “buy-and-build” strategy.
Debt repayment flexibility is another factor lenders will consider. If you’re a publicly listed company or established market leader, lenders might expect dividends as part of your shareholder remuneration strategy. However, if you’re private equity-backed, they may anticipate aggressive M&A growth and could allow more flexibility with debt repayments to support further acquisitions.
For healthcare providers, navigating debt financing means understanding where you are in your growth journey. If you’re in rapid expansion mode, you should prioritise financing that gives you flexibility for acquisitions. You’ll need to think about whether an amortising loan (like a Term Loan A) or a bullet repayment loan (like a Term Loan B) fits your cash flow profile. You’ll also want to be mindful of lender restrictions, as some loans can prevent dividend payouts or impose specific leverage ratios before allowing cash distributions. And if M&A is part of your strategy, it’s smart to structure financing with an acquisition facility or flexible credit line to keep your expansion plans on track.
In the end, lenders are looking for a predictable cash flow profile, manageable debt levels, and a financially sound acquisition strategy. Preparing for these key questions will help you secure favourable financing terms.”
How should a healthcare provider navigate debt financing across different phases of growth and maturity?
“When it comes to navigating debt financing, healthcare providers should understand that debt providers don’t dictate strategy — they’re more about supporting the financial needs of a company in line with its specific strategic goals. However, there are certain factors lenders will focus on to assess the financial health of a healthcare business, especially as it grows and matures.
For starters, lenders look at geographic diversification. Healthcare is a heavily regulated industry, and local policies can shift unexpectedly. For example, stricter regulations in Germany for private equity or reduced reimbursement rates in Poland can pose risks. Operating in multiple countries helps spread that risk, making the company more appealing to lenders.
Next, revenue source diversification is key. If a healthcare provider relies solely on public healthcare funding, it’s vulnerable to government reimbursement cuts. A mix of public and private patients provides more financial stability and makes the business more resilient to changes in reimbursement policies.
Another important factor is service line diversification. If a provider focuses on one specialty — say, ophthalmology — it can be risky if regulations or market conditions change in that field. Offering a broader range of services or treatments, like expanding into physiotherapy or primary care, can make a business more adaptable and attractive to lenders.
When it comes to growth, businesses in the early stages should prioritise expansion into different regions and service areas. Lenders look for businesses with strong, predictable cash flow and a clear plan for scaling operations. For more mature companies, the focus shifts to demonstrating consistent profitability and risk diversification. Established businesses that balance expansion with financial stability are in a better position to negotiate favourable debt terms, ensuring they have the flexibility to weather regulatory shifts.
An example would be Affidea, the pan-European diagnostic imaging service provider. They started as a radiology provider in Central and Eastern Europe but diversified by expanding into Western Europe, serving both public and private patients, and adding new therapeutic areas like physiotherapy and primary care. This kind of strategic diversification helped Afidea become more resilient to market and regulatory changes, making them a stronger candidate for debt financing.
Ultimately, lenders look for businesses with a high quality service offering, reliable operations, a strong track record (hence good reputation) and an experienced management team. From a financial perspective they look for diversification, financial stability, and clear growth plans. Healthcare providers that strategically expand their geographic footprint, diversify their service offerings, and mix their payer sources are more likely to secure favourable and flexible financing terms.”
What are some alternative exit routes, beyond an IPO, for a private equity-owned company?
“An IPO is often seen as the ultimate exit route for private equity, but there are other paths that can be just as, if not more, rewarding. One common option is a strategic sale, where the company is sold to a strategic buyer — typically another company in the same industry. These buyers are often willing to pay a premium because they can achieve synergies, either by cutting costs through operational efficiencies or by expanding their market reach and product offerings. This makes the deal more attractive and justifies a higher price.
Another option is a secondary buyout, where one private equity firm sells a company to another private equity firm. This is common when the current owner wants to exit, and the new owner sees potential to take the company to the next level. Companies, like Affidea, can go through multiple rounds of buyouts, which gives private equity firms more flexibility to sell.
So while an IPO might be the most well-known route, strategic sales and secondary buyouts offer great alternatives for private equity to exit and realise their returns.”
Focusing specifically on healthcare services, which sub-sectors within healthcare services are currently attracting the most capital?
“Among healthcare services, occupational health and safety (OHS) providers are currently attracting strong interest from both debt and equity investors. The main reason is their business model, which is typically B2B, based on contracted revenue and cash generative.
For example, in the Netherlands, employers are legally required to engage either an occupational physician or a certified third-party OHS provider. This creates a stable, recurring revenue stream, making OHS businesses highly attractive to lenders and investors.
Additionally, OHS providers have low capital expenditure (CapEx) requirements compared to med tech or pharmaceutical companies, which need to invest in production facilities. OHS companies primarily rely on hiring qualified occupational physicians—who are in high demand — but once they have the necessary professionals in place, they can generate revenue almost immediately.
Recent M&A activity and financing processes indicate a strong appetite for investment in OHS services, largely due to their predictable revenue model, cash-generative nature, and relatively lower reimbursement risk compared to other healthcare sub-sectors.”
Summarising, the financing environment for healthcare businesses is strong at the moment. The right strategy for a healthcare provider looking to scale aligns with its commercial goals, return-on-equity targets, and risk appetite. Debt financiers assess factors such as size, geographical footprint, track record, service quality, operational reliability, and the experience of the management team. However, they don’t dictate strategy — they support financial needs in line with a company’s objectives.
At HBI 2025, we’re hosting a panel titled “Preparing for Exit, Acquisition, or Growth: The Banker’s Perspective on Current Financing Options.” For more insights, don’t miss HBI 2025! Register now!
We would welcome your thoughts on this story. Email your views to Rakshitha Narasimhan or call 0207 183 3779.
