Health care, as an industry, is unique compared to others. So, when it comes to getting funding for businesses in this space, there' can be challenges that might not exist for others.

"With the complexity of the billing, banks, lenders and others, some shy away from it because it is very complex, especially when you look at it from an asset-based lending perspective, a line of credit based on the receivables — a very complex receivable, not so easy to calculate and get comfortable as a lender," says Neil Johnson, managing partner at Lawrence, Evans & Co. "Looking from a line of credit, the specialty lenders, they really dig in and try to find the value of it and feel comfortable with those assets."

Bank funding for a health care company makes the most sense when the company is growing and needs working capital to fund the business or buy out a partner, he says.

"Typically, the working capital, when they're growing, especially in health care, because the receivables may not be paying in 30-60 days, lenders understand that it takes on average a longer period of time to bill and collect it — insurance or government," he says. "Certain sectors, they may advance within 15 days, but a lot of times they're expecting on average 40 to 60 days. Some industries we worked with on average, very unique, but nine months. And that gives heartburn to a lot of traditional lenders that want to get comfortable with that. So, that's where some of the specialty lenders come in, understand the business, understand the complexity of it and are willing to take that risk."

Private equity is another option for health care companies. Johnson says the explosion of private equity and family offices mean that funds, some of which are focused exclusively on the health care space, continue to be raised.

The circumstances that would make PE a great option for a health care company could be when a business wants to reduce its risk and take some cash off the table with the owner. But owners and operators considering PE funding should look carefully at the investor.

"I like to say, smart money and dumb money," he says. "Some that have a lot of experience in health care can really help add value with strategy, bringing in partners and relationships and executives. Then there are those that just want exposure to it and really along for the ride, trying to find good operators, good businesses and want exposure to health care."

There are, however, circumstances when PE for a health care company is not the best solution.

"Most of the private equity investors want a control; that means more than 50 percent of the business," he says. "If you're large enough and the situation is good, they would consider a minority investment. But in the lower middle market where we play, typically up to $250 million in revenue and about $15 million in profits, those businesses are going to be what we call control buyouts by private equity. In that case, if you're not interested in working with a financial buyer that's going to have control of business, it's probably not going to be the right situation."

Johnson spoke on the Smart Business Dealmakers Podcast about funding options for health care companies. Hit play to catch the full discussion.