Upload
lilka
View
31
Download
1
Tags:
Embed Size (px)
DESCRIPTION
Steps to Practice Ownership What’s right for me?. Presented by: Jessie Kunkle Bank of America Practice Solutions. Today’s Agenda. 1 .) Practice Ownership Options 2.) Understanding Your Credit 3.) Business Plan 4 .) Approval Process 5 .) Financing Options. - PowerPoint PPT Presentation
Citation preview
Steps to Practice Ownership
What’s right for me?
Presented by: Jessie Kunkle
Bank of America Practice Solutions
2
Today’s Agenda
1.) Practice Ownership Options
2.) Understanding Your Credit
3.) Business Plan
4.) Approval Process
5.) Financing Options
3
Practice Ownership Options
Start Up
Practice Purchase
Buy In/Partnership
4
Starting Up a PracticeStart Up Positives:
– Build a practice the way you want to build it in the space you like the most. New equipment, furniture, etc. that fits your personal style.
– Hire and train your own staff using your business and service philosophies.
– You ultimately get to reap the rewards of your hard work with 100% of profits
– Your work produces results that create value in a business that you own.
– Patient selection matches your personality strengths and weaknesses.
5
Start Up Items to Consider:
– Stress of managing and running an office.
– No patient base– You have to deal with the growing
pains, i.e. staffing, billing, benefits, pay plans, scheduling, to name a few, and then provide dental care.
– You will have to continue as an associate until the practice can support itself.
6
Practice Purchase Positives:– Your patient base is mature
– Established insurance relationships
– Have a patient base already established
– Staff understands their roles and are trained
– Staff maintains relationships with patients and can give you
guidance with individual needs and care
– You are purchasing cash-flow, enabling you to pay yourself
immediately
7
Practice Purchase Details to Consider:
– Possible patient attrition.
– You are buying someone else’s practice
(philosophy, flow, treatment planning,
staff training, systems, etc…)
– The equipment and office may be old
and worn which will require additional
economic investment.
8
Buy In/Partnership Positives:
– Same as Practice
Acquisition
– Very little risk of patient
attrition
– Management of staff is
constant
9
Buy In/PartnershipBuy in Negatives:
– How well do you know your partner
– What do you own?• Undivided Interest….
– Do you share similar philosophies regarding treatment planning, practice management…
– Partnerships are historically difficult to manage and maintain.
11
The 3 National US Credit Bureaus
Competitors: Equifax, TransUnion, Experian
Get a copy every 6 months
Review all 3 bureau files
Your rights under the Fair Credit Reporting Act (FCRA)
12
Your Credit Bureau FileWhat is included in your file
• Contact Information• Trade lines/Accounts
– Installment loans– Revolving lines of credit– Open loans
• Public Record and Derogatory Information• Inquiries• Credit Score
13
The 3 National US Credit Bureaus• Creditors can and will report derogatory information to the
credit bureau when you do not “pay as agreed”
– 30 days past due
– 60 days past due
– 90 days past due
– Charge off
– Collections
– Public Records
14
Your Credit Bureau File
Public Record Information• Suits• Judgments• Tax Liens• Bankruptcy
15
Credit Scores
Understanding Credit Scores
• Your Credit Score is a grade on your credit report.
• Scores Range from 300 to 850+
• Median FICO Score is Approx 723
• Average FICO Score is Approx 693
• Bank of America Practice Solutions 680
• Auto Industry- Tiered Based Pricing
A+
16
Credit Scoring
How are Credit Scores Calculated?
35%
30%
15%
10%10% Payment History
Amounts Owed
Length of Credit
New Credit
Type of Credit
First Thing’s First – Create a Business Plan
1.) Summary Plan– A. Type of Practice– B. Mission Statement– C. Practice Structure– D. Market Opportunity– E. Competitive Advantage – F. Management Team– G. Office Manual– H. Benchmarks– I. Capital Requirements
2.) Target Market3.) Management Team4.) Business and Personal Budget5.) Marketing Strategies
18
The best way to experience success in any venture is to plan.
Need a Business Plan Template???Email Jessie Kunkle for one at –[email protected]
19
The Approval Process• What does it take to get approved?
• The 3 C’s– Credit – We Covered– Collateral
• Your Personal Financial Statement• Liquidity• Are you a home owner?
– Character • Stay away from lavish purchases• Live within your means• Have you started a retirement plan?
20
The Approval ProcessStart UpsApplication Information
• Dental Lic #
• Requested Amount
• Project Information
• Current Associate Info
• Application and Personal Financial Statement
21
The Approval ProcessPractice AcquisitionsGet Pre-Qualified!!!Pre-qualified vs. Commitment letter (Approval)
Pre-qualified means the buyer’s credit, production capabilities, and financials qualify to obtain financing. THIS IS NOT a final approval.
Banks need to review the seller’s financials to review the cash flow, office information to ensure the practice is a good fit for the buyer
So why pre-qualify?: Getting pre-qualified could move you to the front of the line in buying a practice!
22
Required Information-Practice Purchase
• Buyer-– Application and Personal
Financial Statement provided
by Lender
– Curriculum Vitae
– Last 3 years of tax returns
– 12 months of production
reports if available
23
Seller Required Information• Seller
– Seller Profile form provided by Bank
or Broker appraisal
– Current Profit and Loss statement
– Last 2 Years of tax returns (3 years if
loan request is >$500,000)– *Note – If practice broker is
involved normally they can provide all seller information.
24
What to Look for in a Bank Proposal• Practice Finance Loan Proposals-
Important Details to Consider– Terms Available – 5,7,10,12,15 years?– Approval VS. Proposal– Fees – Advance Payments, Admin Fees,
Closing Costs, Origination Fees– Interest Rate- Fixed or Variable? Balloon? – Collateral Requirements? Additional
Collateral? Read the fine print.– Ability to lock the rate?– Prepayment and Principle Reduction
Options?
25
A Tale of Two LoansLoan A
• Interest Rate 5.99%• Term 84 months• Fixed for 5 years• Approved for $400,000• Cost Restrictions• Level Payments• 3% Doc Fee +10% down• 2% Prepayment Penalty
and no principle reduction
BAD LOAN
Loan B• Interest Rate 6.39%• Term 180 months• Fixed for 15 years• Approved for $450,000• No Cost Restrictions• Graduated Payments• 100% Financing• Principle Reduction and
no prepayment penalty after 12 months
GOOD LOAN
26
Sample Loan Structures• Start up Loan
$450,000
• 6.39% 15 year fixed
• 4 months @ $0• 8 months @ $1,587• 12 months @ $3,175• 156 months @ $4,536
• Acquisition Loan $450,000
• 6.39% 15 Year Fixed
• 180 months @ $4,042
Questions?