Page 43 - The Dental Entrepreneur
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The Dental Entrepreneur
Loan Features
Term
You should consider the longest term available which is usually 10 to 15 years. This will
provide you with lower payments at the beginning when you need it the most. After a period of
say 3 to 5 years and your cash flow becomes dependable, you may prepay your loan so that
the term is shortened. Many financial institutions currently offer the first 24 months “interest
only” to ease cash flow pressure.
Pre-Payment
Loan pre-payment penalties vary from lender to lender. It also becomes most important later
in the life of the loan when you may want to accelerate principal prepayment.
I always prefer a loan with no pre payment penalty.
Loan Structure
There are many ways in which loans can be structured but the thing that may interest you the
most in a startup is that you payments begin as small as possible and increase as your
practice begins to grow. This can be accomplished with graduated payments that are interest
only to a tiered payment structure that increases over a specific term. Your bigger lenders
probably have theses type of programs already in place as opposed to you local lender.
Interest Rates
Interest rates can be fixed over a period of time or they can adjust with the prime rate or other
rate indexes. It pretty much a crap shoot as to the predication of interest rate trends but I am
fairly comfortable in saying that where the economy is at as far as the interest rate cycle is I
would lock in a fixed rate. Rates are historic lows. They can only go up and by getting a
variable rate you will almost certainly see your rates increase over the life if your loan.
Lender Services
Other services such as a merchant account (credit card processing) direct deposit accounts
and business credit card accounts are all things you may want to accomplish in one place if
possible
Insurance Assignment
The success of a practice is very much related to the health of the dentist/owner. Do not be
surprised if a lender requires that your life and or disability insurance is assigned to the lender.
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