Buying out a partner
The usual sequence is to agree a value, often through an independent practice valuation; agree how the departing partner is paid, in full at closing or partly over time; then finance the buyout against the practice's cash flow.
Lenders look at whether the practice can carry the new payment once the departing partner's production is accounted for. That is why a transition period, with the partner staying on for some months, often helps. SBA 7(a) loans can finance a partial change of ownership, and a note from the departing partner for part of the price can lower what the remaining owner borrows.
Acquiring a practice
Lenders that specialize in healthcare finance practice acquisitions on the strength of the practice's history and the buyer's clinical experience. They will want several years of the practice's returns, its production and collections, and the purchase agreement.
Equipment and technology
Imaging, chairs, lasers and practice software are commonly financed over five to seven years against the equipment. Some manufacturers have their own programs; an independent quote is worth comparing against them.
Expanding
New operatories or a second office are financed much like a buyout: a term loan sized to the build-out and equipment, repaid from the added production, with working capital for the months before the new space is full.
What helps a file
- Two to three years of practice tax returns, and the owners' personal returns
- Recent production and collections reports
- The partnership or operating agreement
- The valuation, letter of intent or purchase agreement
- A list of current debts and their payments
An engagement of this kind: A partner buyout, closed without disruption.