When it comes to acquiring a dental practice, one of the earliest and most important decisions is choosing which bank can help fund the transition. With so many banks across America, it’s important to compare options like their various programs, financing opportunities, and loan officers before making a choice. This guide gives you an outline for making this crucial call.
It’s a bank, what’s the difference?
Though they may appear to be the same, each banking institution in the U.S. provides unique financial offerings, from different risk levels and cultures to diverse money management programs and offerings. For example, certain banks have home loan programs for doctors and lawyers that allow professionals to make a lower down payment (without having to pay mortgage insurance) on a mortgage if certain requirements are met. Others offer reduced interest rates if a banking relationship is established and maintained for a period of time.
In the banking industry, culture can play a significant role. Local and specialized banks may offer a more personal approach, with the bankers being available for clients and providing closer relationships. On the other hand, large banks might not prioritize small or medium sized businesses as much, resulting in fewer less appealing options. Additionally, certain banks could have a problematic corporate environment in which profit takes priority over risk or the customers.
Selecting the right program
When searching for a new financial product, it’s vital to consider more than just the interest rate. You must also evaluate any applicable loan terms, fees, prepayment penalties, insurance requirements, and banking relationship stipulations, which may be coupled with unseen charges that could negate the advantages of an attractive rate.
The overall cost of a loan is determined by the bank’s risk threshold and where they stand in the market. Generally, lenders with stringent rules often provide lower-cost loans due to their clientele’s reduced odds of missing payments. On the contrary, those who are lenient in terms of lending criteria usually demand higher fees for providing capital.
A client’s financial position will largely dictate the cost for that client to obtain access to capital. It is critically important for a prospective buyer to be financially prepared for an acquisition because great financing will reduce financial costs and boost profit margins. This matters over time! If you have a moment read about the power of compounding interest here!
Most banks have a similar setup; their sales team is the face of the bank and speaks to customers and industry experts to get deals for the bank. This team works closely with inside sales personnel and credit teams so that loan processing, examination, consent, and completion all go as planned. Having an attentive lender is critical for smooth transactions. Inattentive and inexperienced teams can delay and/or tank deals.
Identifying a Bank and Lending Professional
Avoid the paradox of choice! Navigating the multitude of banking options and lenders can be a dizzying experience. Rather than attempting to find one right lender in an endless sea, take the time to call around and get your financial situation assessed by a professional who can then connect you with dependable resources that will support you on your journey.
Critical factors to consider in your decision:
1. Knowledge and Experience in Dental Practice Acquisitions: You must work with a lender with experience and knowledge in dental practice acquisitions. The lender should understand the intricate legal issues and nuances of lending for dental practice acquisitions.
2. Reputation: Ask other dentists in your area who they use for financing their acquisitions. You may also want to speak with attorneys or accountants specializing in dental practice transactions. Doing your due diligence upfront can save you time and money down the road, as lenders with a good reputation will be more likely to offer better terms and rates.
3. Programs Offered: Different lenders offer different programs for financing acquisitions. Make sure the lender you are considering offers a program that meets your needs and fits within your budget.
Wood and Morgan has represented over 8,000 dentists since 1980 and focuses its efforts on supporting the dental community with their business needs. If you have questions about leasing office space or buying or selling a dental practice, don’t hesitate to contact Wood and Morgan at 800-499-1474.