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Debt Financing in Healthcare Industries

Capital is a crucial element of all enterprises, whether startups or established firms.

Operational costs are equally essential in helping to run and maintain systems and processes

within a business. As such, businesses seek financing for these inputs from various sources. For

this, medical-related industries are no exception. A key way through which these industries raise

finances is through debt financing. Debt financing is when a company or firm borrows or sells

company equity to help raise the needed funds.

The healthcare industry is dominated by three major health service providers: hospitals,

medical equipment manufacturers, and biotechnology companies. Of these, biotechnology

companies use the most debt financing. This pick is, to a significant extent, influenced by the

high market capitalization of biotech companies in comparison to medtech and hospitals.

Additionally, since most biotech companies are focused on research and development, they will

likely obtain their capital investments from investors and the public, who might be looking into

making a profit from the successes of such exploits.

In debt financing, medical equipment manufacturers come second on the list. My

conviction is inferred from the scale of development and manufacturing to the distribution of

medical devices, which eats significantly through capital and operational costs. Further, some

medical equipment manufacturing companies receive financing to help further medical

procedures, such as did TransMedics in their organ transplant therapy (Dorbian 1). Hospitals, on
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the other hand, come last in debt financing since most hospital income assets are liquid from

outpatient services. The respective insurance companies clear the other patient debts, which

helps run the hospital operations.

We can observe that for a firm to raise high amounts of money in debt financing, it needs

to have a high speculatory value. This means that they need to be in the production of something

that provides value in the future, particularly in the healthcare industry.

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Work Cited

Dorbian, Iris. “Medtech Business TransMedics Secures Debt Financing from CIBC.” PE Hub, 16

Sept. 2022, www.pehub.com/medtech-firm-transmedics-group-secures-debt-financing-

from-cibc-innovation-banking/