4 Recommendations in Financing Your Way from Associate to Owner
If owning your own practice is a professional goal of yours, one of the tasks you are likely to encounter is securing the capital to do so. There are many possible options to finance a practice acquisition, whether buying an existing one or starting one from scratch. However, the three most common methods are:
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Bank Financing- Conventional & SBA loans
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Private Money Loans (family/friends/hard money)
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Seller “Carry Back” Financing- Selling practitioner offers to extend the loan to buying practitioner
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Prior to applying, get your financial house in order—Put away a minimum of 6%-10% of the purchase amount in non-retirement savings. Put off any major purchases until you have your loan and start now to repair any known issues with your personal credit.
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Ideally, work as an associate at the selling practice prior to purchasing. If associating at the selling practice is not an option, try to select a well running, profitable practice for your purchase. Unlike the “worst house in a good neighborhood” scenario, buying a fixer practice will make getting a loan more difficult.
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Consider negotiating an agreement to have the selling practitioner work with you through some phase of the transition—While cold handoffs can be executed smoothly with proper due diligence, they statistically have lower first year revenue and net income than warm transitions.
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Student loans over $200,000—If possible, refinance these with a fixed rate at the longest term possible. Loans in deferment, while providing a temporary low monthly payment, can be a hindrance to obtaining your practice loan.