Financing is an important part of a practice purchase. Understanding what a lender will review—and organizing the information early—can make the process easier for both buyer and seller.
How lenders evaluate the purchase
A lender looks at both the buyer and the practice. The buyer’s credit, financial obligations, experience, and clinical production help establish their ability to take on ownership. The practice’s cash flow helps show whether it can support its operations and proposed debt.
A promising practice and an enthusiastic buyer are only the beginning. Approval depends on the lender’s review and the terms of the specific transaction.
Prepare the financial information
Buyers may be asked for tax returns, personal financial statements, details of existing debt, and records of clinical production. Sellers generally need to provide practice tax returns, current financial reports, a practice profile, and information about secured obligations.
Complete and consistent records help lenders evaluate the opportunity. Gathering them takes cooperation, so buyers and sellers should understand their responsibilities and respond promptly to requests.
Look beyond the interest rate
Compare the full cost and conditions of financing. Fees, required banking services, prepayment provisions, repayment structure, and other terms can affect the overall cost and flexibility of a loan.
Make sure you understand which costs are due upfront, which are financed, and how the terms could affect a future refinance or early repayment. Ask the lender to explain anything that is unclear.
Understand conditions and financing risk
A loan approval may include conditions that must be satisfied before funds are released. Coordinate the financing timetable with due diligence, legal review, and closing requirements.
Seller financing introduces different risks. If a bank has declined a loan, a seller considering financing the buyer should understand the reasons and seek advice before accepting that exposure. A desire to complete the sale should not replace careful review.