Choosing Medical/Dental Practice Acquisition Loans & Lenders

You have been searching and searching, and finally you’ve  found the ideal practice to buy. Your good credit and the financial strength of the practice have won you the interest of several different medical specialty lenders for up to 100% financing.  Now you have a couple Loan Proposals or Loan Commitments from these lenders, it is time for you to select a lender.

 They are both reasonable offers, how do you choose? First, lets understand the difference between a Loan Proposal and a Loan Commitment.

A Loan Proposal is a lender’s expression of interest in further exploring practice lending opportunity subject to further review of your loan request and financial information. Most lenders will issue a Loan Proposal with minimal information on borrower and practice.  Loan Proposals allow lenders to gain their borrower’s commitment to borrowing from them before spending too much time processing their loan application. A Loan Proposal may be issued upon lender’s review of loan application and borrower’s personal credit history. Acceptance of a Loan Proposal will require borrower’s signature and commitment fee to move forward to loan analysis and underwriting.

A Loan Commitment, is only issued once the lender has a complete application package, financial information on both buyer and seller such as personal and business tax returns, practice appraisal and other pertinent information.

Now how do you compare Loan Commitments from different lenders to ensure you have selected the one that offers you the most effective financial solution and future success. It is critical that you pay attention to all terms and conditions not just the interest rate.  Here are our suggestions when you are comparing commitments:

1. Make sure you are comparing Loan Commitments to Loan Commitment not a Loan Commitment to a Loan Proposal

2. Loan Term- Most professional practices need 7 to 10 year amortization term to repay its debit.  Is the loan fully amortized or is there a balloon payment

3. Loan Rate- What is the rate, is it fixed or adjustable

4. Loan Fee – Are there any origination fees, points, documentation fee, closing costs, attorney fee

5. Borrower Equity Injection – How much do you have contribute towards the purchase price 0%,10% or 20%

6. Collateral – What will the lender require for collateral?  Most lenders will take the practice for collateral of their loan, some may require additional collateral such as your home or deposit accounts.

7. Future Borrowing Limits – Is lender limiting your ability to borrow any additional dollars

8. Owners Compensation Limits – Are there any maximum limits to owner’s compensation

9. Prepayment Penalties – How many years, prepayment penalties should be limited to the first 3 or 4 years.

If all other considerations are equal, make sure you can comply with other terms and conditions of the Loan Commitment before choosing your lender.  Consider your lenders experience in financing medical, dental, veterinary, optometry, chiropractic, or podiatric practices.  How familiar is the lender to healthcare professional market, can they support you throughout your career?

Sina Afredi, is the National Commercial Real Estate & Practice Financing Manager for Matsco (a medical specialty lender).  She can be reached at  sina.afredi@matsco.com or via phone at (888)391-9521.

David Greene, The Vet Broker
Medical Practice Brokers, Inc., 15847 Woodmeadow Ct., Colorado Springs, CO 80921
Phone: (719) 487-9973    Fax: (719) 487-9974    Email: dave@vetbroker.com