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Funding facility infrastructure and energy efficiency improvements, especially within the healthcare market, takes a tailored and unique approach to meet your goals. There are many options when comparing and contrasting what might work best for your energy project and how to best suit the needs of your organization. This is where SitelogIQ can help – we partner with our customers to drive savings, efficiency, sustainability, and create better healthcare facilities to promote exceptional patient care.
Types of Healthcare Project Funding
1. Commercial Property Assessed Clean Energy (C-PACE)
An innovative form of energy financing that exists in many states throughout the U.S. is Commercial Property Assessed Clean Energy, or C-PACE. For healthcare facilities, securing C-PACE financing solves the upfront cost barrier by providing 100% financing for your healthcare project. This financing option helps overcome procurement hurdles, enabling large-scale energy savings initiatives, and implementation of turnkey projects to meet high priority facility needs. It also helps you create a long-range facility roadmap to benefit your patients and staff through a process made simple for healthcare administrators.
C-PACE is not credit sensitive, because the lien is against the property and not the organization managing it, the lending community views this as investment grade. This can be a very powerful tool in accessing competitive capital for organizations that in of themselves would not be considered investment grade credit.
2. Loans and Leases
For investment grade (IG) bond/credit rated organizations, a loan or lease-like product may be another financing option to consider. These organizations will typically have a Better Business Bureau rating of BBB- or higher, yielding borrowing or lease terms of 10-20 years depending on the project specifics. These financing vehicles also may be eligible for tax exempt funding depending on the nature of their IRS classification. Organizations such as 501(c)(3)’s may be eligible for this form of tax exempt financing, which can further reduce the interest rate.. There are multiple lenders in this segment ranging from commercial banks, private equity, and/or infrastructure funds. As a result, it is a highly competitive lending environment that can lead to competitive project finance rates.
3. Energy-as-a-Service
A more recent financing option for energy improvements is Energy-as-a-Service or EaaS. EaaS is an option in which a third-party owns and maintains energy infrastructure improvements for a period of time, usually 10-15 years. Under this model, the customers pay the system owner a fee based on the benefit received. For example, think buying the lumens from a light bulb, not buying the fixture itself. This structure also does not require any money down, just a commitment to purchase the utility/benefit from equipment.
4. Traditional Bonds
Lastly, bonds are a common way of financing major infrastructure improvements, and potentially even acquisitions. While most of the debt for healthcare organizations comes in the form of bond obligations, the amount financed is usually significantly more than an energy project would cost on a per-site basis. Should this be of interest, SIQ has the knowledge and network to explore your bond syndication options.
It doesn’t stop there. Creative funding approaches can also support near-term budget constraints with multiple products deferring initial payments for up to 2 years while the operations benefit from the performance of the new equipment. Clients have a multitude of options in how to best benefit from the flexibility in timing that capital providers offer.
Our Process for Identifying Funding Options
To begin, the SitelogIQ team will identify opportunities to save energy, money, and other attributes in maintaining top tier healthcare facilities. Because the condition of the facilities, age(s), technology, equipment, and capital maintenance budgets vary so vastly, it is paramount to consider what funding mechanisms can provide the greatest overall value for your project. Considerations that would drive our recommendations and financial models:
- Condition and efficiency of existing facility infrastructure
- Goals/targets for sustainability
- Plan for funding upcoming projects
- Energy use intensity of facility versus benchmarks
- Credit rating, ability to access cost effective capital
As your project takes shape, our capital markets team will meet and work closely with your finance or treasury group to make the most of the project’s impact to your operations while always focusing on the bottom line, so your organization can continue advancing the highest quality patient care.
Contact us today to learn what funding solution may work best to help you create a safer, healthier, and more sustainable healthcare facility for your patients and staff.