Healthcare Financing

As more healthcare practices are being Consolidated, Acquired, Sold Expanded etc. I have provided some example questions for Dental Practices (many would be relevant to other Doctor Fields), and financials that would be required to help with a smooth lending experience. (By having this information ready, it will quicken the underwriting process, and hopefully prevent some headaches.)

On the lending side Financial Institutions can assist with Acquisitions, Expansion, Practice Buy-Ins, Working Capital/Term and Equipment Purchases. (Generally looking for the practice to be in existence for 2+ years otherwise seen as a startup)

HEALTHCARE FINANCING:
Some Options Available: Physicians, Dentists, Veterinary Services, Optometrists, Mental Health Specialists etc.

With conventional underwriting Banks are generally looking for cash flow of 1.2 or greater (subject to time in business, strength of guarantors, length of loan etc.).

1. Acquisitions/ Expansions/ Buy-ins subject to the strength of the borrower (and time in business) options up to 15 years (subject to strength of the borrower and time in business) and 100 % financing (conventional financing). SBA options can provide alternative options
2. Real Estate: up to 10 year terms, 25 year amortization and up to 100 % financing. (There are also SBA options which provide alternative options.) You/ Client should be provided ALL options.
3. Working Capital/ Term Facility: up to 10 year terms, 10 year amortization and up to 100 % financing. (SBA options provide alternative options)

Borrower Information:

• What type of Practice? (e.g. what procedures will be performed)

Staff : Current /Proposed
Dentist(s)
Office Manager(s)
Administrative
Dental Assistant(s)
Hygienist(s)
Associate(s)
Other

• Resume
• What is the borrower’s basic business strategy, key factors to success, and primary competitors? 

Loan Request

• Purchase Price
• Business Evaluation (if available)
• Sources and Uses (i.e where funds are coming from, and what they will be used for e.g. equipment, buildout, purchase of real estate etc.)
• Practice Acquisition:
• Who are the primary customers and how are payments received (e.g. Fee for Service, Insurance/PPO etc.)? 
• What is the borrower’s basic business strategy, key factors to success, and primary competitors? 
• Why the borrower would like to purchase this specific practice. 
• Discuss any procedures performed by the seller (i.e. crown & bridge, fillings, endodontics, etc.) that will not be maintained by the borrower? Will the borrower maintain the existing production of the seller?
• Why is the practice being sold? What is the transition plan? Will the seller have a non-compete agreement
• Is there an Associate working in the practice? If yes, please address the following:
• Why have they elected not to purchase the practice?
• Does the Associate plan to remain with the practice post acquisition? 
• What is their compensation and will that change post acquisition? 
• What is the associate’s non-compete agreement and will that change post acquisition?
• What, if any, concerns are there regarding patient and/or staff attrition?

Practice Startup (less than 24 months in existence)

• How many days per week (current/proposed) is the borrower working as an Associate? What is the distance between their Associate and proposed practice location? 
• Is the borrower currently under a non-compete agreement? If yes, how many years are remaining and what are the distance requirements?

General Questions:

• How many active patients do they have?
• How much of the revenue comes from routine hygiene visits?
• What new services will be added or removed?
• How does / will the practice do to ensure high patient retention?
• Does/ Will the practice take advantage of the demand for cosmetic dentistry?
• Breakdown of procedures income generated.
• How many chairs?
• Hours of operations?

Provide any additional information you believe is significant to this request.
FINANCIALS:

• 3 Most recent Years Business Tax Returns (of current Dental Practice and Dental Practice purchasing
• 3 Years yearend Balance Sheet and income Statement (internally prepared is fine) – if available
• Interim Financials current year v. previous year (Balance sheet and Income Statement)
• 2 Years Personal Tax Returns
• Personal Financial Statement (Owners of 20 % or more) - the bank will provide
• Accounts Receivable and Payable Aging
• Projections
• If Startup (Business Plan)

Please feel free to reach out with any questions. If you have some good advice please share in the comment section.



Reminder: Each loan request is different. The above are guidelines only.