As a commercial real estate broker, who specializes in healthcare and medical practices, I want to share with you why I believe obtaining a loan preappoval is a pivotal step to open medical practice. Besides finding a commercial agent that specializes in healthcare, the most important step to is not finding the office space, but insuring you have the funding available to do it right!
Most people do not have $250,000 to $400,000 at their disposal. So, they will have to borrow money which will give a clear plan as to what property they can afford. Preapproval for a loan should be the first step in the process of opening a practice. There are many major lenders that have divisions dedicated to medical practice loans. Do not forget to compare lenders and, do not go with the first quote. Instead you need to shop around for the best rates and services offered. Below are objectives you should think about when applying for a loan.
Think about what you will use the capital for
The first step when thinking about getting a loan for your medical practice is, what will I use the capital for? This will help determine which lender you should choose. All lenders will have different pros and cons. Some will loan for tenant improvements, medical devices or even working capital.
Determine how you will allocate the funds
A build out for the practice is costly and knowing how much money you have to invest with will determine the size of the property and how much you can afford to spend on the build out. Some lenders will offer 100% financing for all your needs from design or architectural fees, to construction or renovations. Of course, the loan can also be used for equipment, cabinetry and other project expenses, including tenant improvements.
Do you need working capital to help you get started?
The benefit to a working capital loan is that it let’s doctors proficiently cover holes in working capital expenditures. So, in the beginning when you are still working to be profitable you have that cushion and can focus on the practice not worrying about the money you are not yet making.
Property owners will take your offers more seriously
One of the inquiries I get asked when talking to a broker or owners is, how are the potential tenant’s financials? If you’ve obtained preapproval it conveys to the property owner that you can afford rent and are serious tenant. Preapproval shows that you have good credit and are a worthy tenant and all owners love this.
Trouble financing the deal in the 25th hour
The final and maybe utmost significant benefit of getting preapproval is that you will not run into problems getting financing once the property is found and negotiations start. With preapproval, you know what you can afford and what the bank is willing to give you. There is no guessing as to whether or not you are going to be able to get a loan, or how much you will get. For the owners of the property, it means there will be no loan contingency helping to close the deal smooth and quickly.
“This is a critical career decision that will affect the success of the doctor and the practice for many, many years.” Jason Tyson, vice president of Bank of America Practice Solution
So now that you know the most important process in opening a practice you are well prepared for the challenge!
