Understanding Credit And Financing

So you have decided to purchase a practice. Whether you have opted to buy an existing practice or are attempting a startup, you are going to need financial assistance. Very few doctors are in a position to fund a purchase on their own, so obtaining financing is probably a necessary step in your transition process. Understanding the fundamentals of financing will better equip you to make smart lending choices.

During your search for a suitable lender, bear in mind that you are essentially seeking to purchase money. The interest rate will determine how much you will pay in exchange for the loan. Lenders offering the lowest rate will cost you less, but it is also important to find lenders who understand the dental industry and who are sensitive to your particular needs and professional goals.

Besides the crucial importance of interest rates, the terms of the financing agreement also impact the suitability of the loan. You may wish to make larger payments over a shorter period of time or, alternatively, smaller payments for a longer period. If either option is important for your business to succeed, find a lender who offers flexible term options.

Your credit will play a major factor in whether you are approved the lending required to purchase your new practice. Bad credit will negatively affect the lenders confidence in your ability to repay the loan on time, and may even cause them to deny the loan. If you have any of the following items on your credit history, they may increase the cost of borrowing money or prohibit you from securing financing:

  • Bankruptcy
  • Judgements
  • Liens
  • Delinquencies (90 days past due, etc.)
  • Little or no credit history
  • Too many inquiries, or requests for credit history

Maintaining a solid credit history is not difficult. Making payments on time and explaining any unusual delinquencies should enable you to secure the funding needed to purchase your practice.

To avoid being surprised by unexpected credit complications, be sure to routinely check your credit history. You will need to request reports from all three credit bureaus, as they maintain independent records. If you suspect that a credit item has been reported in error, be sure to contact each bureau directly to initiate an investigation into the discrepancy. The credit bureaus are legally obligated to confirm the status of accounts and public records, and they will provide you a summary of their findings upon completion of their inquiry.