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As A Dentist How Do I Shop For A
Loan?
 Questions
And Answers With America's Biggest Finance Geek, David Catalano of Finance Geeks
.
One of the
questions dentists do NOT often ask me, but should is, "How do I shop
for a loan?"
Lenders are
everywhere. That is one of the problems I see in shopping for a loan.
Remember my rule:
just because they will lend you the money doesn't mean you should take it.
1) Your first step is
to determine the ideal loan structure.
2) Then go shopping
for that loan.
The ideal loan
structure is a function of your assets, goals and cash flow.
Your Assets -
are what have for collateral or can offer as a secondary source of repayment.
Are you using a building, your practice, your house or the new equipment you
might be buying? The type of collateral will drive your rate and term.
Real estate usually
offers the lowest rate and the longest term and your new equipment usually
commands the highest rate and the shortest term.
Your Goals -
these include retirement savings, expansion planning, personal life issues like
a new house or spouse. A loan with the wrong terms can derail your plans very
quickly.
Make sure you have
fully contemplated your future before you shop for a loan. Prepayment penalties,
loan terms, amortization and fees need to be considered within the context of
your goals.
Your Cash Flow
- the trick to wealth in dentistry is cash flow. Maximize it. Then use the free
cash flow monthly to invest in tax deferred vehicles likes real estate and
retirement plans.
Start with your
lifestyle cash requirement. How much do you need monthly to sustain your life at
home. This needs to be backed out of your practice cash flow.
Your practice cash
flow is your (monthly collections) minus (your monthly expenses and your monthly
lifestyle requirement).
You want this number
to be 1.2 times all of your monthly business debt.
Some lenders do not
complete this calculation and just lend you the money. It is your responsibility
to make sure the loan works for you.
Imagine not factoring
a major expense into this equation like your retirement investments.
Now you are ready
to shop for a loan.
What payment did your
Cash Flow calculation tell you to get? This is largely driven by the loan
amortization. The longer the amortization, the lower the payment.
What collateral did
your Asset analysis determine you should use? Do you have a goal in the near
term that is going to be impacted by your loan?
These questions and
answers drive the loan terms you need to obtain. Start calling lenders
and ask them for specific loan terms. Do not waste your time talking to
lenders that cannot help with what you need.
When you obtain a
commitment from a lender make sure you fully understand what it means before you
take the loan.
Have
a question or a comment for me?
Send
it to david@financegeeks.com.
Finance Geeks
provide unique wisdom and expert advice to healthcare professionals. Their
strategies help dentists create and maintain wealth. David Catalano has over 20
years experience dealing with dentists.
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UP TO $2,000 for your
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