|
Hi, David Catalano here again.
Did you read the Rich Dentist Poor Dentist report I sent you? If so, good job!
You'll remember our Rich Dentist sought out professional advice when dealing with financial situations. Especially when borrowing money.
Since you don't do it everyday (borrow money) I'd like to share some advice with you about that topic.
One of the questions I'm asked over and over again is, "As a dentist,
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.
* * * * * *
We have developed a unique process called The Financial Leadership
Solution to help solve this issue in detail of how to shop for a loan.
Copy and paste this link into your browser for an overview: http://www.financegeeks.com/financialleadership.htm
Schedule An Appointment on a Monday or
Wednesday I
schedule initial client calls with the intent to determine if it makes any
sense for us to work together. If it doesn't, I am totally okay with that.
My team and I cannot help everyone. I must feel that we can add value to
your life before we will accept you as a client. And you must feel the
same.
To schedule a time for a 30 minutes call, please reply to this email or
give Meghan a call at 800 800-1776.
Thank you and have a great day!
David Catalano
|