Common Mistakes When Applying for a Dental Practice Loan
Obtaining a loan to purchase a dental practice can often be more complicated than purchasing a house. When seeking a dental practice loan, avoid these common mistakes.
- Missing Necessary Documentation
Being proactive during the documentation phase of the process is key to having all necessary papers in hand when approaching the lender.
Failing to have all financial documents, proposals, and business plans can significantly delay the process.
When approaching a lender, ask them for a list of everything you’ll need before you make an appointment to speak to a loan officer.
- Poorly Written Proposal
Lenders don’t give money to just anyone. They want to make sure that you have a rock solid business plan in place that spells out, in detail, what you plan to do with the money. Your lender will want to know about the income the business will bring in over the course of three to seven years, how you plan to increase or maintain profits, and information on staff growth, pay rate, and insurance.
If you don’t know how to create a business proposal, it’s best to ask a dental practice broker to help draft one that your lender will approve.
- Having a Marginal or Poor Credit Rating
With the number of professionals seeking dental practice loans, lenders have become picky. Is your credit history short? Do you have a fair or good credit rating? Do you have any late payments in your report?
Lenders are flooded with loan applications, which means they can only to lend to dentists with a good credit score.
If you have a habit of missing credit card payments, have little to no revolving debt, or have liens or other derogatory marks on your report, chances are your loan application will be denied.
- Not Using the Right Lender
One of the biggest mistakes dentists make when seeking capital to purchase a business is to approach the wrong kind of lender. A real estate lender or small business lender can help you purchase the property or get startup funds, but only a lender specializing in dental practice loans will be able to help you find all the money you need for every aspect of your business plan.
Using the wrong lender can actually hinder your ability to buy a practice, can delay the process, or even cost you more money in fees, escrow, insurance, and loan interest.
- Doing It Alone
The worst mistake you can make when trying to get a loan is going through the process alone. Unless you are a real estate agent, loan officer, finance manager, business manager, property inspector, dental practice broker, and a dentist all rolled into one, you will need to have at least one or two of the above listed professionals on your team.
Not only will it benefit you to have a team of financial and business professionals on your side, it will be a tremendous asset when you begin your search for a practice or need help transitioning your practice and staff into the new business.
One of the most important people on your team is your dental practice broker who will have the knowledge and experience necessary to make your transition from dentist to dental practice owner as smooth and fast as possible.
For more information on how to get a dental practice loan, speak to one of our brokers.