4 Things To Consider When Finding Your Practice Lender

Many individuals in search of a loan will focus solely on rate, but knowing other aspects of the loan and lender is incredibly important.

The five primary components of a loan include:

1. Term/Amortization (Loan amortization is the process of scheduling out a fixed-rate loan into equal payments. A portion of each installment covers interest and the remaining portion goes toward the loan principal.)
2. Amount borrowed
3. Monthly payment
4. Prepayment penalties
5. Rate

Choosing a loan term can have a significant impact on your rate. Most practice lenders offer 10-year terms, but it is common to also see 7-, 10- and 15-year terms as needed, depending on the situation. Taking a slightly higher monthly rate, but getting yourself into a better overall program could be a smarter financial decision in the long run.

One of the most important factors to consider when choosing a practice lender and bank is your personal, professional and practice goals. Before searching for a lender, consider:

• What is important to you in a financial partner? Do you prefer to work with a lender face-to-face or is communicating over the phone or online okay? Which lenders have good reputations with colleagues? Are there additional fees and charges associated with a loan?
• What future plans do you have for your practice? Do you plan to expand your current space or would you like to open a second location someday? If so, discuss this with potential lenders now to know if they can help with these needs in the future.
• How do you envision running — or how do you run — your practice operationally? Will you be able to reach a lender at any time or are they only available during business hours? Does a lender provide the tools and processes you need to handle your practice’s financial needs?

A prepayment penalty essentially marries you to your lender or bank with a penalty should you decide to move banks. The last thing you want to do is choose a loan today based on rate, when that lender may not be equipped to fulfill your next need, causing you to get hit with a prepayment penalty because you are forced to change lenders to handle your new need.

This series of events could negate your rate-based decision and may cost you even more money than what you saved in the first place with the lower rate.

Other factors you may want to consider:

1. If you need to buy a practice building or real estate to build your practice on, sometimes this can be financed within the same loan, but sometimes you may need a different type of loan.
2. Does the lender offer construction or expansion loans?
3. Are equipment loans available if needed?

Take your time and ask questions. Finding a lender that has the best program AND will provide you the best support is worth some extra effort.