Navigating Healthcare CHOW: The Critical Role of a Specialized Financing Partner
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Fact-checked by: Bruce Sayer
A change of ownership (CHOW) in the healthcare sector is a complex, highly regulatory process. Success requires careful planning, regulatory expertise, and strong financial backing to ensure uninterrupted care and compliance.
CHOW transactions often involve legal, operational, and financial diligence. Delays in approvals or payer transitions can disrupt revenue at a time when facilities must continue meeting payroll, investing in upgrades, and preparing for new ownership. That’s why having the right financial partner is critical – not only to close the deal but to ensure a smooth handoff and a stable start for the new operator.
This article explores the financial challenges that can stall CHOW transactions, a specialized lending solution that helps streamline cash flow and mitigate risk, and the key qualities to look for in a financing partner.
Understanding the financial complexities of CHOW transactions
CHOW transactions in healthcare are generally more complex than traditional M&A. In addition to the typical transaction steps, healthcare transitions must comply with layers of federal and state regulations. Approvals from Centers for Medicare & Medicaid Services (CMS), state health departments, and licensing boards can significantly delay timelines.
Meanwhile the facility still needs to operate. Payroll, vendors, and compliance upgrades often can’t wait. These overlapping demands add pressure and increase the need for flexible, reliable capital.
A significant need for liquidity
A CHOW transaction often requires more working capital than expected to ensure a smooth transition. Common challenges include:
- Reimbursement delays: Medicare, Medicaid, and private payer revenue may pause during credentialing.
- Compliance investments: New owners may need to fix legacy issues or upgrade systems.
- Debt overhang: Previous owners’ obligations may fall to the buyer.
- Undercapitalization: Buyers often underestimate early-stage capital needs.
These demands on working capital can result in stalled transactions, compliance violations, or poor post-transition performance without the right financial structure to accelerate liquidity.
The role of specialized asset-based lending solutions
CHOW transactions in healthcare often create liquidity gaps, especially when delays in license transfers or payer credentialing disrupt revenue flow.
Asset-based lending (ABL) offers a flexible, scalable cash flow solution by allowing facilities to borrow against eligible assets, primarily accounts receivable. It provides a revolving line of credit that adjusts to asset values, helping operators to meet payroll, pay vendors, and cover transition-related costs, without waiting for reimbursement timelines to catch up.
Why ABL is ideal for CHOW transactions
ABL is well-suited to meet the liquidity, and flexibility demands of healthcare ownership transitions:
- Maintains cash flow during credentialing or payer delays by providing access to working capital from receivables and other assets.
- Flexible structure that scales with the facility as receivables and asset values grow
- Minimizes financial strain by covering payroll, vendor obligations, and operating costs.
- Requires no equity dilution offering a more flexible structure than traditional debt.
- Supports compliance and operational stability, reinforcing trust with regulators and stakeholders.
Why choose a specialized lending partner
Not all lenders understand CHOW. Traditional lenders may shy away from regulatory timelines or see reimbursement delays as risks. A specialized lender knows how to navigate these hurdles and can structure financing accordingly.
Partnering with a specialty lender experienced in healthcare financing brings critical regulatory familiarity and financing flexibility that conventional lenders simply can’t match. These lenders understand Medicare and Medicaid anti‑assignment rules. They know how to structure compliant lockbox or double‑lockbox arrangements to manage receivables without violating regulations. The best of these lenders are solution focused when facing challenges, and forward thinking in applying innovation to strengthen customers’ capital positions. In doing so, they minimize regulatory risk and deliver tailored funding solutions that ensures operational continuity during ownership transitions.
Look for partners with:
- Healthcare experience: Especially with CHOW, regulatory finance, and reimbursement cycles.
- Flexibility: Ability to tailor facilities to your deal.
- Collaborative mindset: Willingness to work with your legal, financial, and operational advisors
A case study in CHOW financing
eCapital, a leading provider of ABL, extended a $4 million revolving line of credit to help four skilled nursing facilities in Illinois manage working capital needs during a CHOW transition. The operators needed a customized financing approach to maintain financial stability throughout the ownership shift. With its strong track record in healthcare financing and specialized experience structuring CHOW transactions, eCapital emerged as the natural financing partner. This arrangement enabled smooth operational continuity during the transition and equipped the facilities for sustained future growth.
Conclusion
CHOW transactions are complex, high-stakes events where the right financial strategy can make or break success. Experienced, solution-focused lenders who specialize in CHOW financing are uniquely equipped to provide tailored funding solutions that align with regulatory timelines and support long-term success under new ownership.
Contact us to partner with a specialized healthcare lender to ensure your CHOW transaction is financially secure, operationally seamless, and set up for long-term success.
Key Takeaways
- A change of ownership (CHOW) in the healthcare sector is a tightly regulated process that must be followed. Careful planning, expert oversight, and financial stability is required.
- The right financial support is critical to complete the transaction within regulatory constraints and ensure the new ownership is equipped to operate smoothly from day one.
- Asset-based lending (ABL) provides a flexible, scalable cash flow solution by allowing facilities to borrow against eligible assets, primarily accounts receivable. It provides a revolving line of credit that adjusts to asset values.
- Experienced, solution-focused lenders who specialize in CHOW financing are uniquely equipped to provide tailored funding solutions that align with regulatory timelines and support long-term success under new ownership.
ABOUT eCapital
At eCapital, we accelerate business growth by delivering fast, flexible access to capital through cutting-edge technology and deep industry insight.
Across North America and the U.K., we’ve redefined how small and medium-sized businesses access funding—eliminating friction, speeding approvals, and empowering clients with access to the capital they need to move forward. With the capacity to fund facilities from $5 million to $250 million, we support a wide range of business needs at every stage.
With a powerful blend of innovation, scalability, and personalized service, we’re not just a funding provider, we’re a strategic partner built for what’s next.
Steven Silver
Overseeing the business development team, Steven is responsible for originating, underwriting, and executing senior secured revolving, term loans, and bridge loans for eCapital Healthcare portfolios.
Prior to joining eCapital Healthcare, Steven was Product Head of the General Industries and Asset Based Lending Group for MidCap Financial, and President and Founder of Auto Finance Partners, LLC, a national sub-prime auto lender. In addition, he also served as Chief Marketing Officer of Capital Source Inc., and Executive Vice President of GE Healthcare Commercial Finance and its predecessors, responsible for leading originations.
Steven holds the designation of Certified Public Accountant and earned a Bachelor of Science degree from the University at Albany.
