Keys To Obtaining a Practice Loan
Boefly's Mike Rozman discusses five keys to successfully getting a bank loan for your practice.
by Mike Rozman
We all know the story — the economy is down and money is tighter than before. And, as a dentist, you may be feeling the pinch, whether you are planning to open a practice, expand an existing practice, or looking to purchase new, state-of-the-art equipment.
Whatever the case may be, money is the key ingredient to make your plans a reality, and if you don’t have enough of it, then you may be thinking about obtaining a bank loan. This sounds simple enough on paper, but when it comes to the process of securing financing in a tight credit market, things can get confusing and, at times, frustrating.
Luckily, the news isn’t all bad for dental practices in terms of getting loans. As reported in “The Wall Street Journal” earlier this year, doctors do not face as many issues as others in securing bank loans because their services are widely acknowledged as valuable and necessary In other words, health care is more recession-proof, and most doctors typically have real estate or equipment with which to collateralize the loan.
Still, as a dentist, you may be in the market for a loan, either right now or very soon. If you are a dentist that is currently in the market for a loan, consider the following tips from BoeFly, the online exchange that successfully connects business borrowers with over 1,000 participating lenders. BoeFly has analyzed the financing requests posted on its marketplace and identified the key elements necessary for obtaining a practice loan on the best possible terms:
1. Be prepared — First impressions count, and submitting a "bank-ready" request may very well determine whether the bank proceeds. When bankers first look at your financing request, it should provide a brief summary of the transaction including the loan purpose, loan amount, type of business, debt service coverage, primary collateral and loan to value, debt to worth ratio, management experience, and your credit score. The loan summary may get your foot in the door, but you must be prepared to provide complete backup to the summary information. BoeFly is a helpful resource for dentists, providing all the tools to create and submit “bank-ready” requests to multiple interested lenders.
2. Cast a wide net (without risking your personal credit) — As a dental practice borrower, you want to get the best possible terms (lowest rate, longer term, lower monthly payments, etc.). So it's critical to connect with as many lenders as possible. However, every time a dentist or any borrower applies at a bank, he or she eats up precious time and money (in printing expense, postage fees and missed revenue from patient care. In addition, every time any business borrower applies for a loan, the bank will obtain a credit report, which can negatively impact the owner's credit score. By using an online marketplace like BoeFly, the dentist can cast a wide net and get in front of hundreds of lenders who won't pull a credit report until the lender and the dentist know they want to move forward together. The more lenders a dentist connects with, the better the terms for the dentist. In addition, BoeFly's tools provide you with links to obtain your credit score without impacting credit rating. BoeFly also provides dentists with the tools for creating a comprehensive "bank-ready" loan package, as well as a template for creating a business plan for their practices.Visit the BoeFly website at www.boefly.com.
3. Be realistic and think like a banker — You need to be realistic when you are seeking a loan for your practice. Think like a banker and be prepared to answer the banker's top questions: "Is there a clear vision on how the practice will pay back the loan? If things get tough, is there a fallback position? Does the dentist have management experience and a good credit history? Does the dentist have “skin in the game” (i.e., money at risk)? BoeFly has obtained and compiled the lending preferences from its participating lenders to efficiently match loan requests with interested lenders. Dentists can use BoeFly’s special fundability wizard to determine the strengths and weaknesses of their request and see how they can improve their chances of obtaining a loan with favorable terms.
4. Respond in a timely manner — When you are speaking with a banker, you should expect clarifying questions before a loan is approved. It is very important to respond to these inquiries in a timely manner. Bankers deal with numerous loan requests. If you are slow in responding to a banker's inquiries, you may lose momentum and the banker's attention and interest. If you are slow in responding, it causes the banker to ask, "Is this dentist serious? Do I want to invest my time into understanding this practice, or should I just move on to the next request?" Providing quick answers to your banker's questions is your best path forward.
5. Be your own salesperson — Small-business bankers have an almost endless supply of business borrowers, including dentists, seeking financing. Dentists who have successfully secured loans convinced the banker that they and their practices were credit-worthy. Clearly, financial analysis is critical to the loan-making decision, but there is also the need for a dentist to enthusiastically sell the banker on his or her practice. This is achieved through an accurate and complete presentation of information and articulation of your vision. This information and visian can be spelled out in your business plan), but it also needs to be referenced when you speak on the phone and in person. If you believe in your practice and are enthusiastic about its prospects, make sure the banker knows it!
Mike Rozman is co-president and chief strategy officer of BoeFly, LLC. Rozman oversees business development, marketing, and external affairs. He drives best practice information in the credit industry, overseeing BoeFly’s educational programs and outreach, and is a frequent speaker at conferences and events focused on small business lending, franchise financing, and secondary markets. Previously, Rozman was the president and co-founder of Edgeware Analytics, Inc. the parent company to GovGex and Small Business Loan Exchange, the two online marketplaces that served as the founding platforms of BoeFly. Prior to co-founding Edgeware Analytics in 2003, he was a vice president at JP Morgan Chase in its Global Bank.