4 Things To Consider When Finding Your Practice Lender | ADA Member Advantage

4 Things To Consider When Finding Your Practice Lender

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By Michael Jerkins, MD, M.Ed

Dentists are generally considered a desirable customer by banks. Even if you have student loan debt, lending institutions that understand dentistry will be happy to work with you to finance your practice acquisition, new build, or even a partnership buy-in if you are joining an already established group practice.

Choosing a practice lender and banking partner is a very important decision. Practice lenders and banks don’t just support you with a loan. They can also assist you with successful practice operation and future growth through additional banking products and services.

Here are 4 things to consider when finding the right lender

1. The basics of your loan options

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.

2. Your practice needs

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?
3. Are there prepayment penalties?

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.

4. Other factors

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.

About Michael Jerkins, MD, M.Ed

Michael is the President and Co-founder of Panacea Financial and is also a practicing physician in Little Rock, AR. After earning his BBA in Economics he deferred his medical school acceptance to teach middle school science in the Phoenix, AZ area while also earning his Masters in Education from Arizona State University. He then completed medical school at the University of Tennessee Health Science Center before finishing his residency at University of Cincinnati Medical Center and Cincinnati Children’s Hospital.

About Panacea Financial

Endorsed by ADA Member Advantage to provide practice financing solutions, Panacea Financial, a division of Primis (NASDAQ: FRST), is a nationwide financial services company offering products in all 50 states as well as Washington, D.C. and Puerto Rico. Panacea offers a full suite of banking solutions specifically built for doctors, by doctors. Learn more about Panacea Financial.