How Capital Financing Helps Senior Living Providers Preserve Days Cash on Hand—and Improve Bond Ratings

Liquidity is a central factor in credit evaluations for providers. Rating agencies assess days cash on hand (DCOH) alongside leverage and coverage ratios to understand not only an organization’s current financial position, but also how consistently liquidity has been managed over time.

While baseline liquidity benchmarks are widely discussed across the industry, sustained liquidity levels are generally associated with stronger rating categories and greater strategic flexibility. That's because DCOH is evaluated in context alongside liquidity trends, capital structure, and debt burden over time. 120-200 DCOH may represent a baseline for financial health, but higher levels are consistently associated with stronger rating categories and great financial flexibility.¹ Benchmarking analyses, including the CARF Financial Ratios & Trend Analysis, reinforce this broader, longitudinal view. ²

The implication is clear: liquidity is more than a safeguard. It is a metric that influences credit strength, supports organizational flexibility, and positions providers to navigate uncertainty while pursuing long-term priorities.

Even amidst operating pressures in today’s environment, many senior living providers are still well positioned from any concerning DCOH numbers. It can therefore be tempting to approach liquidity tactically by tracking DCOH, but not actively managing it.

At the same time, capital expenditures are not slowing down. In the years leading up to a major expansion or bond issuance, providers face a steady stream of capital needs, both planned and unexpected. Deferred maintenance, smaller buildouts, technology upgrades, and large software implementations are among the most common.

When these investments are funded directly from cash, organizations can unintentionally create a disconnect between operating strategy and credit strategy. Even high-return investments can weaken DCOH at precisely the time when liquidity matters most.

By the time a rating agency evaluates the organization, that erosion is already reflected in the numbers and impacting rating outcomes long before borrowing costs are locked in.

This is where capex financing for senior living is often misunderstood.

Too often, financing is viewed as a secondary option, used only when cash is already constrained.

Leading CFOs are changing their mindset to view financing as a primary tool for preserving liquidity, not replacing it.

By financing shorter-lived assets and ongoing capital needs, providers can:

• Continue to preserve DCOH
• Maintain stronger liquidity positions ahead of bond issuance
• Align asset life with financing structure

Rather than simply optimizing the balance sheet, DCOH is central to credit evaluation frameworks and reinforces that cash preservation directly supports credit strength.²

The result is a more aligned strategy that allows providers to continue investing in operations and growth while helping protect the financial profile that drives bond pricing.

When rating agencies evaluate a senior living organization, they are not just assessing where it stands today, they’re evaluating how it has managed financial decisions over time. That includes how and when cash was deployed.

This reframes the approach to capital planning for CFOs: every decision made ahead of a bond issuance is inherently a credit decision.

Protecting liquidity before entering the bond market is a controllable, yet often overlooked, driver of long-term borrowing costs.

When used strategically, capex financing allows organizations to preserve DCOH, which helps strengthen bond ratings and maintain flexibility in an increasingly complex operating environment. Because ultimately, the goal isn’t just to access capital. It’s to help ensure that when you do, you’ve positioned your organization to secure it on the best possible terms.