Capital Is Financing, Not a Gift
When a provider funds a renovation, the institution generally repays it through commission reductions, fee structures or extended contract terms.
That is not inherently bad. It is simply financing, and it should be evaluated like financing.
Ask one question of every capital offer: what is the effective interest rate, and what happens if we leave early?
1. Separate the Ask From the Offer
Begin with a facility condition and program assessment: what must be replaced, what should be renovated, and what would create genuine competitive advantage over the next five, ten and fifteen years.
Then evaluate offers against that plan rather than letting proposals define the plan.
2. Understand Amortization and Unamortized Balance
Capital is typically amortized over the contract term. If the agreement ends early, the unamortized balance usually becomes payable.
Long amortization schedules can quietly reduce future flexibility — the institution stays because leaving is expensive, not because performance is strong.
3. Define Ownership and Condition
- Title
Who owns the improvements and equipment during and after the term.
- Maintenance
Who repairs, replaces and services funded assets.
- Condition
Required condition at expiration and who funds deferred maintenance.
- Documentation
Invoice-level substantiation of what was actually spent.
- Timing
Committed spend schedule with milestones and remedies for delay.
4. Compare Against Institutional Financing
Institutions with access to low-cost capital frequently find self-funding less expensive over the term, while preserving flexibility and negotiating leverage.
The right answer depends on cost of capital, balance-sheet priorities and how much flexibility leadership wants at the next renewal.
