<PAGE>
 
--------------------------------------------------------------------------------
               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                   FORM 10-Q

[ x ]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

For the quarterly period ended:  March 31, 1998

                                       OR

[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number:   0-21425

                      HEALTHCARE FINANCIAL PARTNERS, INC.
             (Exact name of Registrant as specified in its Charter)

                  Delaware                              52-1844418
       (State or other jurisdiction of               (I.R.S. Employer
       incorporation or organization)               Identification No.)

        2 Wisconsin Circle, Suite 400
           Chevy Chase, Maryland                           20815
   (Address of principal executive offices)              (Zip code)

                                (301) 961-1640
             (Registrant's telephone number, including area code)

  Indicate by check mark whether the Registrant (1) has filed all documents and
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                  Yes    X                   No
                      -------                   -------

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

  Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Common Stock ($.01 par value)               13,342,215 as of March 31, 1998

--------------------------------------------------------------------------------
<PAGE>
 
                      HEALTHCARE FINANCIAL PARTNERS, INC.
                                   FORM 10-Q

                                     INDEX

<TABLE> 
<CAPTION> 
                                                                                                       Page
<S>                                                                                                    <C>
PART I.  FINANCIAL INFORMATION
 
Item 1.  Financial Statements

         Condensed Consolidated Balance Sheets at March 31, 1998
         and December 31, 1997 (Unaudited)..........................................................   1
 
         Condensed Consolidated Statements of Income for the three
         months ended March 31, 1998 and March 31, 1997 (Unaudited).................................   2
 
         Condensed Consolidated Statements of Equity for the
         year and three months ended December 31, 1997 and March 31, 1998 (Unaudited)...............   3
 
         Condensed Consolidated Statements of Cash Flows for the three months
         ended March 31, 1998 and March 31, 1997 (Unaudited)........................................   4
 
         Notes to Condensed Consolidated Financial Statements (Unaudited)...........................   5
 
 Item 2. Management's Discussion and Analysis of
         Financial Condition and Results of Operations..............................................   7
 
PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings..........................................................................  13
 
 Item 2. Changes in Securities......................................................................  13
 
 Item 3. Defaults Upon Senior Securities............................................................  13
 
 Item 4. Submission of Matters to a Vote of Security Holders........................................  13
 
 Item 5. Other Information..........................................................................  13
 
 Item 6. Exhibits and Reports on Form 8-K...........................................................  13
 
 SIGNATURES.........................................................................................  14
</TABLE>
<PAGE>

PART I.   FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                      HEALTHCARE FINANCIAL PARTNERS, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
 
                               ASSETS                                   March 31,    December 31,
                                                                          1998           1997
                                                                      -------------  -------------
<S>                                                                   <C>            <C>
Cash and cash equivalents                                              $ 22,535,761   $ 18,668,703
Finance receivables                                                     302,367,986    250,688,138
Less:
   Allowance for losses on receivables                                    3,305,128      2,654,114
   Unearned fees                                                          3,579,675      3,161,237
                                                                       ------------   ------------
       Net finance receivables                                          295,483,183    244,872,787
Deferred income taxes                                                     1,284,665      1,041,520
Property and equipment, net                                               1,120,125        416,284
Goodwill                                                                  1,696,441      1,740,097
Prepaid expenses and other assets                                         6,957,920      5,615,555
                                                                       ------------   ------------
       Total assets                                                    $329,078,095   $272,354,946
                                                                       ============   ============
 
              LIABILITIES AND STOCKHOLDERS' EQUITY
 
Line of credit                                                         $ 19,384,923   $ 40,157,180
Commercial paper facility                                                19,126,743    101,179,354
Warehouse facility                                                       44,767,800     27,932,520
Client holdbacks                                                          5,862,486      6,173,260
Accounts payable to clients                                                 695,714        834,367
Income taxes payable                                                      2,585,226      5,138,144
Due to related parties                                                    1,673,889              -
Accounts payable and accrued expenses                                     4,196,462      2,217,947
Notes payable                                                                92,414        115,286
Accrued interest                                                            846,983        776,700
                                                                       ------------   ------------
       Total liabilities                                                 99,232,640    184,524,758
 
Stockholders' equity
   Preferred stock, par value $.01 per share; 10,000,000 shares
     authorized; none outstanding
   Common stock, par value $.01 per share; 30,000,000 shares
     authorized; 13,342,215 and 9,670,291 shares issued and
     outstanding, respectively                                              133,422         96,703
   Paid-in-capital                                                      218,019,114     79,784,045
   Retained equity                                                       11,570,002      7,949,440
   Unrealized holding gain on investment securities
     available-for-sale, net of tax                                         122,917
                                                                       ------------   ------------
       Total stockholders' equity                                       229,845,455     87,830,188
                                                                       ------------   ------------
       Total liabilities and stockholders' equity                      $329,078,095   $272,354,946
                                                                       ============   ============
</TABLE>

                            See accompanying notes.

                                       1
<PAGE>
 
                      HEALTHCARE FINANCIAL PARTNERS, INC.

                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                  (UNAUDITED)
 
                                                       Three Months Ended
                                                       ------------------
                                                            March 31,
                                                            ---------           
                                                        1998         1997
                                                     -----------  -----------
 
Fee and interest income:
   Fee income                                        $ 4,108,204   $2,570,411
   Interest income                                     8,196,576    1,917,922
                                                     -----------   ----------
Total fee and interest income                         12,304,780    4,488,333
Interest expense                                       3,800,254    1,133,156
                                                     -----------   ----------
Net fee and interest income                            8,504,526    3,355,177
Provision for losses on receivables                      651,014      150,000
                                                     -----------   ----------
Net fee and interest income after provision
   losses on receivables                               7,853,512    3,205,177
Operating expenses:
   Compensation and benefits                           1,116,334      771,538
   Commissions                                            48,206       30,421
   Professional fees                                     178,081      173,417
   Occupancy                                             123,669       47,509
 Other                                                 1,147,367      843,598
                                                     -----------   ----------
Total operating expenses                               2,613,657    1,866,483
Other income                                             821,478      429,399
                                                     -----------   ----------
Income before income taxes                             6,061,333    1,768,093
Income taxes                                           2,440,771      647,089
                                                     -----------   ----------
Net income                                           $ 3,620,562   $1,121,004
                                                     ===========   ==========
 
Basic earnings per share                             $       .35   $      .18
                                                     ===========   ==========
Weighted average shares outstanding                   10,283,279    6,214,991
                                                     ===========   ==========
 
Diluted earnings per share                           $       .34   $      .18
                                                     ===========   ==========
Diluted weighted average shares outstanding           10,668,910    6,320,482
                                                     ===========   ==========


                            See accompanying notes.

                                       2
<PAGE>
 
                      HEALTHCARE FINANCIAL PARTNERS, INC.

                  CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
                                  (UNAUDITED)

                                        
<TABLE>
<CAPTION>
                                                                                      Accumulated
                                                                        Retained         Other
                                             Common       Paid-in       Earnings     Comprehensive      Total
                                              Stock       Capital       (Deficit)       Income         Equity
                                              -----       -------       ---------       ------         ------     
<S>                                          <C>        <C>            <C>           <C>             <C> 
Balance at December 31, 1996                 $ 62,150   $ 26,704,234   $   (45,408)                  $ 26,720,976
 
Net and Comprehensive Income                                             7,994,848                      7,994,848
 
Issuance of 3,450,000 shares of $.01    
  par value common stock                       34,500     53,005,310                                   53,039,810
 
Common stock issuable under
  directors' option plan                                      15,989                                       15,989
 
Common stock issued under
  employee option plans                            53         58,512                                       58,565
                                             --------   ------------   -----------   -------------   ------------
 
Balance at December 31, 1997                   96,703     79,784,045     7,949,440                     87,830,188
                                                                                                     ------------
 
Net income                                                               3,620,562                      3,620,562
 
Unrealized holding gain on investment
  securities available-for-sale, net of                                                                           
   tax                                                                                     122,917        122,917 
                                                                                                     ------------ 

Comprehensive Income                                                                                    3,743,479
                                                                                                     ------------
 
Issuance of 3,657,500 shares of $.01
  par value common stock                       36,575    137,895,839                                  137,932,414 
 
Common stock issuable under
  directors' option plan                                       3,990                                        3,990
 
Common stock issued under employee
  option plans                                    144        335,240                                      335,384
                                             --------   ------------   -----------   -------------   ------------
 
Balance at March 31, 1998                    $133,422   $218,019,114   $11,570,002   $     122,917   $229,845,455
                                             ========   ============   ===========   =============   ============
</TABLE>

                            See accompanying notes.
                                        
                                       3
<PAGE>
 
                      HEALTHCARE FINANCIAL PARTNERS, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                       Three months Ended March 31,
                                                                      ------------------------------
                                                                           1998            1997
                                                                      --------------  --------------
<S>                                                                   <C>             <C>
Operating activities
  Net income                                                           $  3,620,562    $  1,121,004
  Adjustments to reconcile net income to                             
    net cash provided by operations:                                 
    Depreciation                                                             43,023          22,414
    Amortization of goodwill                                                 43,656
    Stock compensation plan                                                   3,990
    Provision for losses on receivables                                     651,014         150,000
    Deferred income taxes                                                  (243,145)        (97,845)
    Changes in assets and liabilities:                               
      Increase in accounts payable to related parties                     1,673,889       8,029,700
      Increase in prepaid expenses and other                               (165,122)       (512,433)
      Decrease in income taxes payable                                   (2,384,036)
      Increase (decrease) in accrued interest                                70,282         (99,408)
      Increase (decrease)  in accounts payable and accrued expenses       1,839,862        (916,243)
                                                                       ------------    ------------
        Net cash provided by operating activities                         5,153,975       7,697,189
Investing activities
  Increase in net finance receivables                                   (51,958,843)    (26,051,168)
  Increase in investment in limited partnership                            (499,872)
  Purchase of property and equipment, net                                  (746,864)        (61,124)
  Purchase of investment securities                                        (167,794)
                                                                       ------------    ------------
        Net cash used in investing activities                           (53,373,373)    (26,112,292)
Financing activities
  Net (payments) borrowings  under line of credit                       (20,772,257)     11,709,028
  Net (payments) borrowings under                        
    commercial paper facility                                           (82,052,611)      7,560,407
  Net borrowings under warehouse facility                                16,835,280
  Issuance of common stock                                              138,098,916
  (Decrease) increase in notes payable                                      (22,872)          7,042
  Distributions to limited partners, net                                                   (317,993)
                                                                       ------------    ------------
      Net cash provided by financing activities                          52,086,456      18,958,484
                                                                       ------------    ------------
  Net increase in cash and cash equivalents                               3,867,058         543,381
  Cash and cash equivalents at beginning of period                       18,668,703      11,734,705
                                                                       ------------    ------------
  Cash and cash equivalents at end of period                           $ 22,535,761    $ 12,278,086
                                                                       ============    ============
 
 Supplemental disclosure of cash flow information
   Cash payments for interest                                          $  3,729,971    $  1,232,564
                                                                       ============    ============
   Cash payments for income taxes                                      $  5,067,952    $    470,263
                                                                       ============    ============
</TABLE>

                            See accompanying notes.

                                       4
<PAGE>
 
                      HEALTHCARE FINANCIAL PARTNERS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
                                        

1.   Basis of Presentation

     The condensed consolidated financial statements of HealthCare Financial
Partners, Inc. (the "Company") for 1997 include the accounts of the Company and
the accounts of its wholly-owned subsidiaries, HCFP Funding, Inc., HCFP Funding
II, Inc., HCFP Funding III, Inc., Wisconsin Circle Funding Corporation,
Wisconsin Circle II Funding Corporation, and HealthCare Analysis Corporation.
For 1998, they also included a newly formed wholly-owned subsidiary, HCFP REIT
Management, Inc.  Significant intercompany accounts and transactions have been
eliminated in consolidation.  The Company's principal activity is providing
financing to healthcare providers and to businesses in sub-markets of the
healthcare industry throughout the United States.

     On February 9, 1998, the Company announced the formation of HealthCare
Financial Partners REIT, Inc., an entity that will elect to be taxed as a real
estate investment trust (the "HCFP REIT").  Effective March 1998, the Company
formed HCFP REIT Management, Inc., a wholly owned subsidiary.  This subsidiary
was formed to manage the HCFP REIT, and will be compensated on a fee basis for
management services.  The Company's management believes that the HCFP REIT
represents an effective means for the Company to enhance its client
relationships by referring such clients' long-term real estate financing needs
to the HCFP REIT.

     The HCFP REIT will initially fund its operations with the net proceeds of a
private offering (the "REIT Offering") which closed on May 6, 1998.  The
proceeds were $136,950,000.  The Company purchased a 9.2% ownership position in
the REIT Offering.  The Company's management anticipates that the HCFP REIT will
invest in financing products not offered by the Company, which include permanent
(long-term) mortgage loans, real estate, purchase-leaseback transactions and
other income-producing real estate-related assets in the healthcare industry.

     On March 17, 1998, the Company closed an equity offering in which it sold
3,657,500 shares of common stock and raised $137,932,414 (after underwriters'
discount and offering expenses).

     The accompanying unaudited condensed consolidated financial statements of
the Company have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete consolidated financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates. Operating results for the three ended March
31, 1998 are not necessarily indicative of the results for the year ending
December 31, 1998. The notes to the consolidated financial statements contained
in the Company's Annual Report on Form 10-K for the year ended December 31, 1997
should be read in conjunction with these condensed consolidated financial
statements.

                                       5
<PAGE>
 
                      HEALTHCARE FINANCIAL PARTNERS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
                                        
2.   Significant Accounting Policies

    Cash and cash equivalents

     Cash and cash equivalents includes cash and other liquid financial
instruments with an original maturity of three months or less.
 
    Earnings per share

     In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"),
replacing the presentation required under Accounting Principles Board Opinion
No. 15, "Earnings Per Share."  Under SFAS 128, basic earnings per share is based
on the weighted average number of common shares outstanding excluding any
dilutive effects of options, warrants and other dilutive securities, while
diluted earnings per share reflects the assumed conversion of all dilutive
securities.  For the periods presented herein, all dilutive shares were 
attributable to outstanding options. All prior period earnings per share have
been restated to conform with SFAS 128.

3.   Borrowings

     In February 1998, the Company and HCFP Funding II, Inc. increased the
limits on its financing agreement with Credit Suisse First Boston Mortgage
Capital, LLC under which it securitizes certain loans under the Company's
Secured Term Loan Program from $50 million to $100 million.

4.   Recent Accounting Pronouncements

     As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130").
SFAS 130 establishes new rules for the reporting and display of comprehensive
income and its components; however, the adoption of SFAS 130 had no impact on
the Company's net income or shareholders' equity. SFAS 130 requires unrealized
gains or loses on the Company's investment securities available-for-sale, which
prior to adoption were reported separately in shareholders' equity, to be
included in other comprehensive income. Prior year financial statements have
been reclassified to conform to the requirements of SFAS 130.

     During the first quarters of 1998 and 1997, total comprehensive income
amounted to $3,743,479 and $1,121,004, respectively.

                                       6
<PAGE>
 
Item 2.  Management's Discussion and Analysis of Financial Condition and Results
of Operations

Overview

    HealthCare Financial Partners, Inc. (the "Company") is a specialty finance
company offering asset-based financing to healthcare providers, with a primary
focus on clients operating in sub-markets of the healthcare industry, including
long-term care, home healthcare and physician practices.  The Company targets
small and middle market healthcare service providers with financing needs that
range from $100,000 to $10 million in healthcare sub-markets where growth,
consolidation or restructuring appear likely in the near to medium term. The
Company had 206 clients as of March 31, 1998, of which 80 were affiliates of one
or more clients.  The average amount outstanding per client or affiliated client
group at March 31, 1998 was approximately $2.0 million.  For the three month
period ended March 31, 1998, the Company's net income was $3.6 million and for
the three month period ended March 31, 1997, the Company's net income was $1.1
million.

    The Company currently provides financing to its client through (i) revolving
lines of credit secured by, and advances against, accounts receivable (the
"Accounts Receivable Program"), and (ii) term loans (accompanied, in certain
cases, by warrants) secured by first or second liens on real estate, accounts
receivable or other assets (the "STL Program").  Loans under the STL Program are
often made in conjunction with financing provided under the Accounts Receivable
Program.  To date, the Company has not incurred any credit losses in either
program, although it periodically makes provisions for possible future losses in
the ordinary course of its business.

    The Company has implemented a plan designed to ensure that all software used
by the Company in connection with its services will manage and manipulate data
involving the transition of dates from 1999 to 2000 without functional or data
abnormality and without inaccurate results related to such data.  The Company
does not anticipate that execution of this plan will have a material effect on
its operating results.  However, the Company believes that some of its clients
and payors may not have implemented such programs.  The failure by clients and
payors to implement necessary software changes may disrupt client billing and
reimbursement cycles and adversely affect clients' cash flow and collectibility
of pledged accounts receivable.  The Company is unable to predict the effects
that any such failure may have on the financial condition and results of the
operations of the Company.

    The Company is a Delaware corporation which was organized in April, 1993 and
commenced its business in September, 1993.  Until September 13, 1996 the
Company's name was HealthPartners Financial Corporation.  On that date its
corporate name was changed to HealthCare Financial Partners, Inc.

Financial Information

    The following discussion should be read in conjunction with the condensed
consolidated financial statements, including the notes thereto, of HealthCare
Financial Partners, Inc.

                                       7
<PAGE>
 
Results of Operations

Three Month Period ended March 31, 1998 Compared to the Three Month Period Ended
March 31, 1997

    Total fee and interest income increased from $4.5 million for the three
month period ended March 31, 1997 to $12.3 million for the three month period
ended March 31, 1998, an increase of 174.2%. The increase principally resulted
from an increase of $184.2 million in average finance receivables outstanding
due to the Company's growth in the Accounts Receivable and STL Programs during
the period. Interest earned from the Accounts Receivable and STL Programs
increased from $1.9 million for the three month period ended March 31, 1997 to
$8.2 million for the three month period ended March 31, 1998, which accounted
for $6.3 million of the $7.8 million growth in total fee and interest income
between the periods. The Company increased its client base in the Accounts
Receivable Program from 129 clients at March 31, 1997 to 188 clients at March
31, 1998. Additionally, existing clients increased their average borrowings from
the Company in three month period ended March 31, 1998 as compared to the prior
year. The yield on finance receivables decreased slightly from 17.2% for the
three month period ended March 31, 1997 to 17.1% for the three month period
ended March 31, 1998. Therefore, the increase in fee and interest income was due
to growth in the volume of finance receivables.
 
    The yields on the Accounts Receivable Program for the three month periods
ended March 31, 1998 and 1997 were 16.8% and 16.5%, respectively.  The yields on
the STL Program for the same periods were 17.6% and 23.2%, respectively.  The
decrease of 560 basis points for the STL Program noted for the periods being
compared stems from the composition of the STL Program during these periods; at
March 31, 1997, there were 20 clients in the program, and the majority had loans
with terms of less than six months, resulting in a higher proportion of the
yield being generated from commitment fee amortization.  At March 31, 1998,
there were 46 clients in the STL Program with the average loan term being two
years, and commitment fees were being amortized over this longer average loan
term.  The Company generally expects the yields under the Accounts Receivable
Program to be greater than STL Program yields; however, for the first quarter of
1998, the yields for the respective programs were 16.8% and 17.6%.  The higher
than expected STL Program yield was attributable to the acceleration in the
recognition of deferred commitment fees on loans that paid off prior to their
maturity date.

    Interest expense increased from $1.1 million for the three month period
ended March 31, 1997 to $3.8 million for the three month period ended March 31,
1998, and the Company's average cost of borrowed funds decreased from 8.2% for
the three month period ended March 31, 1997 to 8.1% for the three month period
ended March 31, 1998, as a result of utilizing a lower-cost commercial paper
facility for a greater proportion of the borrowings for the 1998 period. See
"Liquidity and Capital Resources". The increase in interest expense was the
result of higher average borrowings required to support the Company's growth.
Because of the Company's overall growth in finance receivables, net fee and
interest income increased 153.5%, from $3.4 million for the three month period
ended March 31, 1997 to $8.5 million for the three month period ended March 31,
1998. The decreased yield on finance receivables resulted in a decrease in the
annualized net interest margin from 12.8% for the three month period ended March
31, 1997 to 11.8% for the three month period ended March 31, 1998.

    The Company's provision for losses on receivables increased from $150,000
for the three month period ended March 31, 1997 to $651,014 for the three month
period ended March 31, 1998. This increase is attributable to the growth of the
Company's finance receivables and the size of the Company's average client
balance, which increased to approximately $2.0 million, which are among the
factors considered by the Company in assessing the adequacy of its allowance for
losses on receivables. In addition, this increase included a $100,000 in a
specific reserve with respect to one loan that the Company is currently
liquidating. The Company experienced no credit losses in either period.

                                       8
<PAGE>
 
    Operating expenses increased from $1.9 million for the three month period
ended March 31, 1997 to $2.6 million for the three month period ended March 31,
1998, a 40% increase. This increase was the result of a 44.7% increase in
compensation and benefits due to hiring additional personnel to support the
Company's growth, as well as to prepare for the management of the HCFP REIT.
The large increase in personnel resulted in the need to lease additional office
space.  As a result, occupancy costs increased by 160.3%.  The Company also
experienced an increase of 36.0% in other operating costs, all as a result of
the expansion of the Company's operations.

    Other income increased from $429,399 for the three month period ended March
31, 1997 to $821,478 for the three month period ended March 31, 1998.  The
increase in other income was largely attributable to partnership income of
$499,873 in 1998.  This partnership income resulted from the foreclosure on, and
subsequent sale of, a mortgage held by HCFP Funding III, L.P. ("Funding III,
L.P.").  Funding III, L.P. is a limited partnership in which HCFP Funding III,
Inc., a wholly-owned subsidiary of the Company (Funding III), is the General
Partner.  Funding III, L.P. participated in a Department of Housing & Urban
Development auction of a distressed mortgage loan portfolio, from which it
purchased four loans.  Funding III holds a 1% general and a 49% limited
partnership interest in Funding III, L.P., and receives 60% of the income from
the partnership's activities, which is included in other income.

    In 1997, documentation and closing fees were also included in other income.
Beginning in 1998, these internal legal fees are being offset against direct
legal expenses, and the net amount is being amortized over the terms of the
associated finance receivables as an element of yield on the loans.  Thus,
documentation and closing fees are no longer included in other income beginning
in 1998.

    Net income increased from $1.1 million for the three month period ended
March 31, 1997 to $3.6 million for the three month period ended March 31, 1998 a
223.0% increase, primarily as a result of the overall growth in the Company's
finance receivables as described above.


Excess Collateral

    The Company's primary protection against credit losses on its Accounts
Receivable Program is the excess collateral that it takes which consists of
client accounts receivable due from third-party payors which collateralize
revolving lines of credit secured by, and advances against, accounts receivable.
The Company obtains a first priority security interest in all of the clients'
accounts receivable, including receivables not financed by the Company. As a
result, amounts loaned or advanced to clients with respect to specific accounts
receivable are cross-collateralized by the Company's security interest in other
accounts receivable of the clients.


    With respect to revolving lines of credit secured by accounts receivable,
the Company will extend credit only up to a maximum percentage, ranging from 65%
to 85%, of the estimated net collectible value of the accounts receivable due
from third-party payors. The Company obtains a first priority security interest
in all of the clients' accounts receivable, and may apply payments received with
respect to the full amount of the clients' accounts receivable to offset any
amounts due from the clients. The estimated net collectible value of the
clients' accounts receivable thus exceeds at any time balances under lines of
credit secured by such accounts receivable.

    With respect to advances against accounts receivable, the Company purchases
the clients' accounts receivable at a discount from the estimated net
collectible value of the accounts receivable. The Company will advance only 65%
to 85% of the purchase price (which is equal to aggregate net collectible value
minus a purchase discount) of any batch of accounts receivable purchased. The
excess of the purchase price for a 

                                       9
<PAGE>
 
batch of receivables over the amount advanced with respect to such batch (a
"client holdback") is treated as a reserve and provides additional security to
the Company, insofar as holdback amounts may be applied to offset amounts due
with respect to the related batch of client receivables, or any other batch of
client receivables. As is the case with the revolving lines of credit, the
Company obtains a first priority security interest in all of the clients'
accounts receivable.

    In addition, under both programs the Company frequently obtains a security
interest in other assets of a client and may have recourse against personal
assets of the principals or parent company of a client.

    Under the STL Program, the Company's term loans to clients are secured by a
first or second lien on various types of collateral, such as real estate,
accounts receivable, equipment, inventory and stock, depending on the
circumstances of each loan and the availability of collateral.


Turnover


    The Company's results of operations are affected by its collections of
client accounts receivable. The Company's turnover of its finance receivables in
its Accounts Receivable Program, calculated by dividing total collections of
client accounts receivable for each of the following quarters by the average
month-end balance of finance receivables during such quarter, was 2.6x for both
the quarters ended March 31, 1998 and 1997.


Liquidity and Capital Resources


    Cash flows resulting from operating activities provided sources of cash
amounting to $5.2 million for the three month period ended March 31, 1998. This
compares to operating cash flows of $7.7 million for the three month period
ended March 31, 1997.  The most significant source of cash from operating
activities is derived from the Company's generation of net fee and interest
income from its finance receivables, and the more significant uses of cash from
internal operating activities include cash payments for compensation and
employee benefits, rent expense, and other administrative expenses. As the
Company's number of clients and resulting business opportunities have grown, the
Company has primarily used cash in the acquisition of finance receivables under
its Accounts Receivable and STL Programs.
 
    The Company's financing activities have provided the necessary source of
funds for the acquisition of receivables. Financing has been obtained from both
debt and equity sources. The debt financing has been generated from draws on the
a $40 million revolving line of credit (the "Bank Facility"), with Fleet Capital
Corporation ("Fleet"), the sale of commercial paper through an investment grade
asset-backed commercial paper facility (the "CP Facility") with ING Baring (US)
Capital Markets ("ING") which enables the Company to borrow up to $200 million,
and a $100 million revolving warehouse line of credit (the "Warehouse Facility")
with Credit Suisse First Boston Mortgage Capital, LLC. The source of equity
financing during the first three months of 1998 was the sale of 3,657,500 shares
of common stock to the public, which raised $137.9 million. During 1997 the
Company sold 3,450,000 shares of common stock to the public and raised $53.4
million.

    The Bank Facility is a revolving line of credit. The interest rates payable
by the Company under the Bank Facility adjust, based on the prime rate of Fleet
National Bank ("Fleet's prime rate"); however, the Company has the option to
borrow any portion of the Bank Facility in an integral multiple of $500,000
based on the one-month, two-month, three-month or six-month LIBOR plus 2.75%. As
of March 31, 1998 and December 31, 1997, $19.4 and $40.2 million, respectively,
were outstanding under the Bank Facility. The Bank Facility contains financial
and operating covenants, including the requirement that the Company maintain an
adjusted tangible net worth of not less than $5.0 million and a ratio of total
debt to equity of not more than 3.0 to 1.0. 

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<PAGE>
 
In addition, under the Bank Facility the Company is not allowed to have at any
time a cumulative negative cash flow (as defined by the Bank Facility agreement)
in excess of $1.0 million. The inter-creditor arrangements entered into in
connection with the CP Facility excludes borrowings under the CP Facility from
debt for purposes of calculating the debt-to-equity ratio. At March 31, 1998,
the Company was in compliance with all of its covenants under the Bank Facility.
The expiration date for the Bank Facility is March 29, 2002, subject to
automatic renewal for one-year periods thereafter unless terminated by either
party which requires six months prior written notice.

  In December 1996, the Company entered into an agreement with ING for $100
million commitment under the CP Facility. On December 30, 1997, that commitment
was increased to $200 million. As of March 31, 1998, $19.1 million of commercial
paper was outstanding under the CP Facility. As of December 31, 1997, $101.2
million of commercial paper was outstanding under the CP Facility. The CP
Facility requires the Company to transfer advances and related receivables under
its Accounts Receivable Program which meet certain criteria to a bankruptcy
remote, special purpose subsidiary of the Company. The special purpose
subsidiary pledges the finance receivables transferred by the Company to Holland
Limited Securitization Inc., a commercial paper conduit which is an affiliate of
ING (the "Conduit"). The Conduit lends against such pledged assets through the
issuance of commercial paper. The CP Facility generally requires the maintenance
of a minimum overcollateralization percentage of 125%. Under the CP Facility,
ING can refuse to make any advances in the event the Company fails to maintain a
tangible net worth of at least $50 million. At March 31, 1998, the Company was
in compliance with all of its covenants under the CP Facility. The maturity date
for the CP Facility is December 5, 2001. However, the CP Facility may be
terminated by the Company at any time after December 5, 1999, without penalty.

  On June 27, 1997, the Company entered into an agreement with CSFB under the
Warehouse Facility. Under the terms of the Warehouse Facility, the Company is
able to securitize certain loans under the Company's STL Program. The Company
had a total borrowing capacity under the agreement of $50 million as of December
31, 1997. In February 1998, the commitment was raised to $100 million. As of
March 31, 1998, the Company had $44.8 million outstanding under the Warehouse
Facility. The Warehouse Facility requires that the amount outstanding under the
financing agreement may not exceed 88% of the principal amount of the STL
Program loans securitized. Interest will accrue under the financing agreement at
a rate of LIBOR plus 3.75% on the first $50 million and Libor plus 3.0% on the
second $50 million. The Warehouse Facility requires that the loans advanced by
the Company do not exceed 95% of the appraised value of the real estate or a
multiple of the underwritten cash flow of the borrower, that the weighted
average yield of advances under the Warehouse Facility must exceed the prime
rate of interest plus 3%, that the maximum weighted average loan to value of
advances under the Warehouse Facility must be no greater than 85%, and that no
loan in the portfolio has a life greater than five years. Additionally, the
Warehouse Facility requires that, to the extent that the Company makes advances
in amounts greater than $7.5 million to any borrower, that excess is advanced by
the Company through other sources. The commitment to make advances under the
Warehouse Facility terminates on June 27, 1999. Subsequent to that date, no new
loans may be securitized under the existing agreement, however previous loans
securitized will remain outstanding until they have been fully repaid.
Additionally, under the terms of the agreement, the Company has the right to
repurchase any assets securitized at a price equal to the fair market value of
such assets.  At March 31, 1998, the Company was in compliance with all of the
covenants of the agreement.

  The Company requires substantial capital to finance its business.
Consequently, the Company's ability to grow and the future of its operations
will be affected by the availability and the terms of financing. The Company
expects to fund its future financing activities principally from (i) the CP
Facility, which expires on December 5, 2001, (ii) the Bank Facility, which
expires on March 29, 2002, subject to automatic renewals for one-year periods
thereafter unless terminated by either party and (iii) the Warehouse Facility,
which expires on June 27, 1999.  While the Company expects to be able to obtain
new financing facilities or renew these 

                                       11
<PAGE>
 
existing financing facilities and to have continued access to other sources of
credit after expiration of these facilities, there is no assurance that such
financing will be available, or, if available, that it will be on terms
favorable to the Company.

Interest Rate Sensitivity

  Interest rate sensitivity refers to the change in interest spread between the
yield on the Company's portfolio and the cost of funds necessary to finance the
portfolio (i.e., the Bank Facility, the CP Facility and the Warehouse Facility)
resulting from changes in interest rates.  To the extent that interest income
and interest expense do not respond equally to changes in interest rates, or
that all rates do not change uniformly, earnings are affected.  The interest
rates charged on revolving lines of credit secured by accounts receivable adjust
based upon changes in the prime rate.  The fees charged on advances against
accounts receivable are fixed at the time of any advance against a batch of
receivables, although such fees may increase depending upon the timing of
collections of receivables within the batch. The interest rates on the Company's
term loans generally adjust based on the prime rate. The interest rates payable
by the Company under the Bank Facility adjust, based on Fleet's prime rate;
however, the Company has the option to borrow any portion of the Bank Facility
in an integral multiple of $500,000 based on the one-month, two-month, three-
month or six-month LIBOR plus 2.75%. The interest rate on the CP Facility
adjusts based upon changes in commercial paper rates. Because the Company
finances most of the Accounts Receivable Program's activity through the CP
Facility, there exists some interest rate risk since the interest rate on
advances to the Company's clients under the Accounts Receivable Program will
adjust based on the prime rate, and the interest rate on most of the Company's
liabilities under the CP Facility will adjust based on commercial paper rates.
Such limited interest rate sensitivity on the Accounts Receivable Program
portfolio is not expected to have a material effect on the Company's net
interest income if interest rates change. Additionally, because advances against
accounts receivable are generally fixed and financed with the CP Facility, which
has rates that adjust with changes in commercial paper rates, there exists
interest rate sensitivity with respect to advances against accounts receivable,
and if interest rates increase significantly, such an increase could have an
adverse effect on the Company's net interest income. However, this interest rate
sensitivity is mitigated by the fact that (i) advances against accounts
receivable comprise only 7.9% of the finance receivables in the Accounts
Receivable Program as of March 31, 1998, and (ii) the Company does not make
long-term commitments with respect to advances against accounts receivable and
therefore, retains substantial flexibility to negotiate fees based on changes in
interest rates.

Inflation

  Inflation has not had a significant effect on the Company's operating results
to date.

                                       12
<PAGE>
 
PART II.   OTHER INFORMATION

  Item 1.  Legal Proceedings -- Not Applicable

  Item 2.  Changes in Securities -- Not Applicable

  Item 3.  Defaults Upon Senior Securities -- Not Applicable

  Item 4.  Submission of Matters to a Vote of Security Holders --Not Applicable

  Item 5.  Other Information -- Not Applicable

  Item 6.  Exhibits and Reports on Form 8-K

           Supplementary Exhibits
           ----------------------

           99.   Supplementary Data:

           Additional financial and statistical information

           10.1  Amendment to Employment Agreement of Steven I. Silver dated as
                 of April 1, 1998

           10.2  Letter Agreement with Howard Widra re: Stock Options, dated as
                 of September 27, 1997

                                       13
<PAGE>
 
                                   SIGNATURES

  Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.



                                        HEALTHCARE FINANCIAL PARTNERS, INC.



DATE:                                        /s/ Edward P. Nordberg, Jr.
     -----------------                  ----------------------------------- 
                                          By:    Edward P. Nordberg, Jr.
                                               Executive Vice President and
                                                 Chief Financial Officer
                                             (Principal Financial Officer)

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