The MedTrust Capital BlogThe Latest Information on Medical Practice Financing
Fire Your CPA!
Yes, we’re serious. Fire your CPA.
Most healthcare and small business CPAs (maybe yours) have been trained to be very conservative. In our experience, conservative financial planning means missed opportunities. Instead of planning conservatively, consider a plan that minimizes risk and maximizes opportunity.
There is a big difference between the two.
If your practice is buying real estate a conservative CPA will often recommend your practice pay a higher down payment to minimize the monthly payment, lower the interest rate, and shorten the length of your financing. But financing is not just interest rate and term length. After that big down payment for a small interest rate adjustment what will your bank account look like? It’s possible your practice can get financing for the building with no money down and use the extra cash you would have used for the big down payment to purchase yet another building!
A conservative CPA might recommend increasing your monthly payments to get out of debt faster. If you can afford it—why not? The conservative strategy ignores your cash flow. We’ve demonstrated with our clients that a long-term financing strategy, (paying less monthly and using the extra monthly cash saved to invest back into the practice or into retirement accounts) can actually build wealth!
How can your practice minimize its risk but also maximize its opportunities? This is different for every practice. But a strictly conservative plan by a risk-averse CPA unfamiliar with healthcare lending will miss the opportunities every time. Before you finance a new building, an acquisition, an expansion, buy new equipment, or hire a new team, talk to MedTrust Capital Group. We are the healthcare practice financing experts with a long history of securing financing for medical, dental, optometric, veterinarian, and other types of healthcare practices.
You might wind up firing your CPA.
Guest blogger Rod Johnston from Omni Practice Sales knows about buying and selling dental practices. Here is his expert advice on how to buy a dental practice in 16 steps.
Buying a dental practice is like getting a colonoscopy. You know you should probably do it, but it can sometimes be a pain in the nether region. But just like getting a colonoscopy, it can go very smooth if you follow the right steps and use the right professional. Here are a few steps to consider which can make for happy times in the end. No pun intended.
1. Have good clinical skills. Be sure you have the clinical skills to produce the same or more production than the average dentist. In other words, don’t buy a practice right out of dental school when it takes you two hours to prep a crown. Unless you’re super-dentist and can prep a crown in 45 minutes right out of school.
2. Buy existing or startup new. Decide if you want to start up a new practice, or buy an existing practice. We recommend starting by looking for an existing practice in the area you’d like to practice. If after a period of time you cannot find a practice and the numbers make sense in your location of choice, analyze doing a startup. Cash flow is king in dental practice financing and in paying your student loans, so look for an existing practice first and then look at doing a startup.
3. Dental Professional Team. Get professional help from professionals that specialize in dentistry. This includes your attorney, CPA, Banker, and Broker. Just like you don’t want your plumber doing your colonoscopy, you don’t want a bankruptcy attorney helping you with your dental practice purchase and sale agreement.
4. Educate yourself on buying a practice. Know how to read a financial statement, practice management reports, lease terms, etc. There is a lot of information online, such as in the Dentaltown Forums, and other areas where you can get this for free. Your professionals that you will be working with can also help educate you.
5. Find your practice. Use the brokers in the area to help you, as well as study club and state and local association contacts to find a practice of your choice.
6. Stop looking for the Unicorn! Neither a unicorn nor a perfect practice exists. Don’t cross a practice off a list because the carpet is green and you wanted brown. Or, everything else in the practice looks good, but the staff is overpaid. You can’t glue a pointy horn on a horse and call it a unicorn. But, you can change the carpet, paint the walls, reduce staff pay, add endo to the practice, etc. You will be in the practice for a long time, so don’t poo-poo the practice because of a change that the practice can handle.
7. Gather practice documents. At a minimum, you want the following:
a. 3 years tax returns
b. 3 years profit and loss statement
c. 3 years production by procedures and production by provider report
d. Copy of the current lease and any amendments
e. Practice statistics report showing patient demographics and other information
f. Aging balance
g. List of staff salaries and benefits
h. Any associate dentist agreements
i. List of any vendor contracts
j. List of equipment
k. Fee Schedule
8. Consider your offer. So you like most everything about the practice and you want to make an offer. You can work with your professional dental broker or consultant and put together an offer. You’ll want to analyze the purchase price. If you’ve educated yourself, you can do this on your own. If not, you can use a dental professional broker, CPA or consultant to help you put the offer together. The offer is in the form of a Letter of Intent.
9. Get a Loan. Banks love dentists. The failure rate is less than .0125%. Being a successful dentist is like finding a coffee shop in Seattle. It’s pretty hard to miss. Ask your broker, attorney, consultant, etc., for a referral to a lender. Use someone reputable who does dental practice financing. Do not use Suzie Q the local commercial banker. She will treat it like any other commercial transaction and try to run it through the SBA ending poorly with high fees.
10. Completing Due Diligence. After you have agreed to a purchase price and both parties have signed a letter of intent, you will want to schedule due diligence in the office. Prepare ahead of time for due diligence. Know which reports you want to run and what the plan is for the due diligence. You’ll want to truly see what the active patient count is. You will want to review charts. You will want to take a closer look at the equipment. I would also suggest seeing if the seller is available for lunch, or to at least come into the office after due diligence. This will help you get all of your questions answered by the doctor himself/herself.
11. Preparing to Transition. The real work begins here as far as the transition goes. There are somewhere between 50 to 70 items to get done prior to the closing of the sale. We have a checklist if you’d like to see it. This includes everything from setting up a legal entity to getting insurance credentials to ordering a credit card terminal.
12. Staff. All through the process, the staff is hopefully unaware there is a sale going on. The meetings and due diligence have happened in the dark of night, or on weekends all while wearing camouflage. (Kidding about the camouflage.) The reason the staff is not informed of the sale is there is a potential they may leave. Part of the goodwill of the practice is staff. If they all leave, there may be a potential loss of goodwill. We recommend the seller tell the staff when there is a 99% certainty the transaction will go through to closing. Sometimes that may mean a month before closing and other times it may mean the day of closing. Every transaction, every staff, and every dentist is different. It’s a gut feeling we get from experience. Consult with your professional.
13. Closing the Sale. Awe, the day is finally here. It’s similar to any major purchase. Some transactions require an escrow company or attorney to handle the closing. Others can be done by a broker. You will sign the purchase and sale agreement, bill of sale, closing certificate, loan documents and other agreements. It’s a pretty painless process.
14. Notifying Patients. As with staff, patients are not notified until the contracts are signed and the money is in the bank. We don’t notify patients as they may leave the practice just as staff may leave. There is a patient letter that is worked and agreed on between the seller and buyer. The cost is typically split 50/50 between the buyer and seller.
15. Post Sale. If the practice is running well, do not make any major changes for 6 to 12 months. The more changes make the staff and patients uncomfortable. Go in keeping things business as usual. Of course, if there is an ugly orange shag carpet with teal painted walls, by all means, bring the decor up to date. Also, if the practice is on a downward trend, you may need to make major changes including letting a staff member or two go, adding procedures, etc. You need to make sure it will be successful and again, your dental professional advisers can help you.
Following these steps will make your acquisition of a practice a smooth process and not a pain in the end (get it?). Because you want to step into your new practice with a smile on your face on your first day and not looking like you just had a colonoscopy.
MedTrust Capital Group guest blogger Rod Johnston has a vast amount of knowledge, experience and education in all aspects of business and real estate that provide an incredible value to every medical practice. He has managed, owned, partnered and consulted with numerous practices throughout the Northwest over the past decade. All have benefited from Rod’s experience in staff management, accounting, marketing, and practice management. Prior to Omni, Rod spent 15 years as Director of Treasury and also Director of Accounting for AT&T Wireless.
Rod is a licensed commercial broker in Washington, Oregon and Arizona and specializes in commercial real estate. He has an MBA from Seattle University, is a Certified Management Accounting, and is a member of the Institute of Business Appraisers and the National Association of Practice Brokers.
Healthcare professionals, practice owners, and managers interested in buying and selling practices must learn the difference between stock sales and asset sales when buying a healthcare practice.
For some background, a stock sale is where the practice entity stays the same and the ownership (“stock”) of that entity changes hands. All the assets and liabilities inside that practice are transferred to the new owner. The pros of this are that the practice entity remains in existence. Patients aren’t surprised by a name change. Payroll and benefits continue on as they had before under the practice name/tax ID. The con is that since the entity is still in existence and the buyer is buying all the assets and liabilities, you could potentially be buying unknown liabilities (pending law suits, unhappy patients from previous bad care, unpaid taxes, etc). This requires a lot of extra due diligence to make sure that there are no surprises after the sale is finalized and it can be very expensive. The other downside to a stock sale is that the tax write offs to the buyer are not as beneficial as an asset sale (although you can elect to treat a stock sale as an asset sale FOR TAX PURPOSES ONLY in order to take advantage of some of those better tax write offs).
An asset sale is where the buyer creates a new entity and then buys specific assets/liabilities of the selling practice and puts those assets/liabilities inside of his new entity. The pro of this is that you choose the specific assets you want to purchase. The purchase contract will actually have lists of all the assets included and all the assets excluded from the purchase agreement. This limits liability because unknown debt arising in the selling practice’s name is still attributable to the selling practice, even after the sale. The con of this is that administratively it requires some additional legal and accounting work to create a new entity and setup a tax ID, bank account, payroll, etc.
If you opt to keep it a stock sale (which I would not recommend most of the time), then we would suggest that you definitely check with your attorney and hire a professional to do due diligence for you before you close on the sale.
If you have questions about your healthcare practice sale, taxation, or financial issues around your practice purchase or sale, contact Carly Carlson at Aldrich Advisors.
Carly Carlson, CPA, our guest blogger, has over eight years of experience advising businesses and individuals on taxation, accounting, and management matters. In addition to tax and managerial consulting, Carly provides detailed financial and forensic analysis for attorneys throughout the Pacific Northwest. She has assisted in numerous high-profile litigation matters. She is also involved in the valuation of closely-held businesses in Oregon and Washington. Further, as a Certified QuickBooks ProAdvisor, Carly has assisted clients with multiple accounting software conversions both to and from QuickBooks and consults on various bookkeeping and reporting requirements.
- American Institute of Certified Public Accountants (AICPA), Member
- Oregon Society of Certified Public Accountants (OSCPA), Member
Carly graduated with her degree in Accounting from Portland State University.
Online Marketing Tactics From Big Buzz Dental
Over the past 10 years serving the dental industry, online marketing has been a top lead generating tool for countless Big Buzz dental clients. Over the years, the types of online media have changed, ranging from SEO and online advertisements, to Snapchat filters to YouTube advertising. What’s next for 2018? Read on to find out what online marketing tactics you should pay attention to in the coming year. read more…
Read and print this all new informational PDF from MedTrust Capital Group detailing the new SBA rules and if they will affect your healthcare practice acquisition:Will-New-SBA-Rules-Affect-Your-Acquistion
So it’s time to select a collection agency for your dental practice.
Where do you start? A great place to begin is with my Accounts Receivable Survival Guide, created specifically for dental practices who have questions about how to choose a collection agency.
Click ahead for the Ninja’s Account’s Receivable Survival Guide!
What are the differences between SBA vs. conventional loan products?
At MedTrust Capital Group, we provide the type of financing that will work for your practice’s bottom line. We can help you decide on SBA vs. conventional loans and we work to find the programs that will save you money, or help you expand securely.
Many independent healthcare practices take advantage of SBA loans. The Small Business Administration (SBA) operates several loan programs for startup and advanced-stage businesses. The first thing to know is that you don’t usually apply directly to the SBA for a loan, but to a local bank or lender that participates in the SBA loan program. Some of these loans provide long-term financing for ambitious real estate or manufacturing expansion programs, while others help business owners buy franchise outlets or start new businesses. The SBA requires its partner lenders to adhere to strict underwriting guidelines, so SBA-backed loans are not “easy money,” but they can be a great option for healthcare providers, especially those who want to own their own building.
SBA loans have a bad reputation for being paperwork-heavy and taking a long time. This if often the case with inexperienced lenders. MedTrust Capital Group’s 20 year history of financing ensures the complicated SBA process almost always goes smoothly.
Conventional loans have competitive rates and terms that vary much more than SBA loans. Conventional lending standards are similar to SBA standards, but can require less paperwork (although not that much less). Conventional loans may charge higher fees and can require more down payment, but can offer much shorter term periods and sometimes lower monthly payments. MedTrust Capital Group specializes in analyzing a healthcare practice’s debt structure and accurately determining if an SBA loan or a conventional loan or a mix of the two will be the right financial decision for your practice.
MedTrust Capital Group provides 0 Down Commercial Real Estate Financing for Healthcare Professionals of All Specialties
MedTrust Capital Group provides financing solutions specific to the healthcare professionals of all specialties.
MedTrust Capital Group offers flexible solutions that cater to the specific needs of your project. Not only do we understand your industry, we are not bound by strict guidelines, low Loan-To-Value Ratios, or bureaucracy.
MedTrust Capital Group offers zero-money down commercial estate loans to owners occupying at least 51% of the building. Contact us to learn more.
Dental Practice Expansion Financing
Are you considering a dental practice expansion? Technology is pushing the dental industry into uncharted territory. Don’t get left behind. Dental practice expansion can be done in many ways. A dental practice can get more visibility through a more favorable location. It can add space for increased capacity. It can purchase new equipment to provide new services. But how do you know if your practice is ready for expansion?
Most bankers and business managers would have you ask yourself these questions:
- Are you creating positive cash flow?
- Do you want to move to another part of town, one that provides better visibility and helps grow your client base?
- Are you outgrowing your current space?
- Do you want to add more technology?
Two or more yes answers mean your dental practice is ready for expansion. And if the practice is choosing to expand, it will likely need to secure dental office expansion financing. Whether you are relocating, adding a second location, or acquiring a competitor, if your practice can purchase the real estate (with MedTrust Capital, many times with no money down) you will receive great tax benefits, property value, design control, and potential rent income.
Dental practice expansion financing doesn’t just happen with one lender and a single contract. It’s a multi-step process that includes several people to help. You’ll need:
- A lender who has programs specifically for dentists
- A real estate broker who knows the market (if you’re buying)
- Architects and contractors who have experience with dental or medical practices (if you’re building)
- Dental equipment representatives (if you’re buying equipment)
- A CPA and/or financial advisor to walk you through short- and long-term financial implications of owning property
- A business consultant to help you prepare to expand your practice
MedTrust Capital Group is happy to refer from our trusted network if you are seeking someone in any of these roles. Dental practice expansion financing is possible with the help of MedTrust Capital Group and our trusted network.
Buying a pharmacy with zero money down
Buying a pharmacy with zero money down is possible, depending on your income level, credit history, financial strength, amount of assets, and other factors. MedTrust Capital Group provides solutions specific to buying a pharmacy with zero money down.
We analyze the specific needs of your project and come up with flexible lending solutions that meet those needs. MedTrust Capital Group is not bound by stringent guidelines, low Loan-To-Value Ratios, or bureaucracy like a big bank. After a brief phone consultation we can tell you whether you can start planning on buying a pharmacy with zero money down, or if you’ll need a down payment and how much.
MedTrust Capital Group is the transparent financing group. When we can’t help, we put you in touch with the smart groups who can. Buying a pharmacy with zero money down isn’t easy. MedTrust Capital Group can only offer zero-down commercial estate loans to pharmacists that occupy at least 51% of the building they purchase. Zero down financing is not possible for every client. But when it’s possible, a big bank isn’t as likely to tell you.
MedTrust Capital Group has a more diverse range of financial products available for health professionals than a bank– because we only work with health professionals. There are many steps and moving parts when buying a pharmacy. Finance your pharmacy purchase with MedTrust Capital Group.