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Everything You Need to Know about Financing Your Orthodontic Practice Start-up · Hey Docs!

0:03
Welcome to the Haydocks Podcast with your host Jill Allen. Today I have Steve
0:09
Steinbrunner from Provide joining me back on the show. In this episode, we
0:13
are covering all things loans, from what you need to do before you start
0:18
the loan process, to the details when it comes to getting approved, and
0:22
even the nuance of land and property loans. No matter where you are in
0:26
your practice journey, there is something for you in this episode, let's dive
0:31
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That's contact KL dot com. All right, Steve I am so excited
1:23
to have you on the show again today. Thanks for joining us again.
1:26
You're welcome, Jill. I appreciate you having me. It's good to see
1:30
you again. Yes, it's always a pleasure to be here. Always always
1:33
great to have you. And I have to tell you I've been looking forward
1:34
to doing this episode with you because it is really amazing from the last time
1:40
you were on the show until now, just the changes that we have seen
1:44
in the industry. And I hear a lot of things and we'll get into
1:48
it a little bit farther on here, but there's a lot of things that
1:51
I hear from my docs, you know, especially in the Facebook groups,
1:55
and what do you mean a loan costs this much? And da da da
1:57
da, And I can't wait to just unpass at all today. So as
2:00
we get going, the way you remember, I like to start this off,
2:04
is if in the event that somebody doesn't know who you are, hasn't
2:07
listened to our previous podcast, would you mind just kind of talking a little
2:10
bit about yourself, your role at Provide and what Provide is doing and helping
2:16
in the lending side of our industry. Sure, absolutely, and thanks again
2:21
Jille for having me. Yeah, personally, I'm from the Midwest and I've
2:24
been in the dental industry, the healthcare industry for almost thirty years and really
2:30
started off selling dental supplies in small towns in southern Indiana and have had a
2:35
variety of roles and responsibilities in the dental industry since then. Currently, I'm
2:39
a director of Practice Finance for Provide and I'm based out of Denver, Colorado's
2:46
where I'm talking to you from today, my home, sweet home, mine
2:51
too, Provide for people who may not have heard of Provide. Provide is
2:57
one of the leading lenders in the price of it practice healthcare industry. We
3:01
lend money to private practices for physicians, dentists, veterinarians, commercial real estate
3:07
practice lending when you want to purchase or startup or at additional locations. We
3:13
are also a subsidiary of a very well known, one hundred plus year old
3:17
bank, Fifth Third Bank, based out of Cincinnati, Ohio, So we're
3:22
essentially a healthcare division for a very established kind of brick and mortar bank.
3:25
Perfect. Yeah, that's great, that's great, and it's been really fun
3:30
to really see Provide come in and take ownership of the lending space, and
3:37
I know I've got many doctors that are listening that have used you and it's
3:40
just such an easy process. So really, I really appreciate what you guys
3:44
are doing in this space and making it easy for docs to get a loan.
3:49
You know, you think of lending as being one of the more stressful
3:52
things when you think about doing a startup, and I really appreciate that you
3:54
guys have simplified that process for sure. For us, well, you hit
3:59
it on the heads. Simplify the process was exactly what the goal was for
4:03
our founders. And the story is super too. High school friends from Minnesota
4:09
in an apartment in San Francisco. You've heard me tell the story. Yep,
4:13
we're actually doing a software startup and realize that for a private healthcare practice,
4:18
it's not easy to get along. It's a cumbersome process, and so
4:23
they recognized an opportunity to really help the industry make that process a lot more
4:28
efficient, and the success is where we are now. Today. Yeah,
4:30
for sure. For sure. Well, I know today we're going to focus
4:34
a lot on kind of that startup practice per se, and I want to
4:40
talk about kind of the beginning stages of buying a practice because I know I've
4:46
got a lot of docs that listen to Haydocks because they are thinking about getting
4:50
into you know, whether it's going to be a startup or an acquisition.
4:55
They know that their goal is to move away from being an associate and into
5:00
some type of practice ownership. And so what I am hoping we can do
5:04
today is really just talk about the temperature of where things are at and what
5:11
docs need to be focusing on now twenty twenty four. And you know,
5:15
as much as we can talk about the future in front of us, we
5:19
may lean back a little bit on where things were to where they're at now.
5:24
But I'm wondering if we can just start off by talking a little bit
5:28
about maybe our top three or four things that you think that docs really need
5:32
to be thinking about when they are preparing to take out a practice loan.
5:38
And let's start just with doing a startup practice versus maybe talking about they're getting
5:44
ready to do an acquisition. Sure, and I'll share some ideas, and
5:47
some of them may be specific to provide, and so I'll say that understand
5:51
banks are different, yep. And so if I share something that is a
5:56
requirement or a suggestion from our underwriting or our guideline. It may be different
6:00
for another bank down the streets. So I would encourage everybody to ask those
6:03
same questions of everyone, Yes, because they're not all the same, but
6:09
great question, how do I prepare in advance? And I get that call
6:12
a lot for folks that might say, I don't want to get a loan
6:15
now, but I'm in school, you know, and I'm going to be
6:18
getting out in the future, and I want to start preparing now, And
6:21
I'd love to get those calls because the more you can do in advance,
6:24
the easier my processes. Some examples of that would be credit score. That
6:30
is the easiest way to measure kind of the responsibility of all of us financially,
6:34
and it's important to banks as well. And so I would say a
6:39
target minimum credit score is six point eighty. That's what i'd like to see
6:43
people have before they apply for the loan. And if you are lower than
6:46
that, let's investigate that. And a lot of people don't realize you can
6:50
look into what is causing that. You can get a free annual credit report,
6:55
which I encourage everybody to do, and make sure that credit scores healthy,
6:58
well in advance. Another one is cash. We call that liquidity in
7:03
the banking industry, and liquidity is defined Joe by cash on hand that could
7:10
be in if it's an existing doctor in the business, or in a personal
7:13
account at home that is not tied in any way to retirement accounts. So
7:18
liquidity doesn't recognize four oh one k's and independent iras and what have you.
7:26
And liquidity is important. I think maybe even posts two thousand and eight,
7:30
when the country was going through some financial challenges, banks began to really demand
7:35
that borrowers have a little bit of cash. And if you think about it
7:39
from a common sense point of view, makes sense. Right, if we're
7:42
going to loan money to somebody for a business venture, we'd like to be
7:46
also assured that they have a little bit of money on their own to fall
7:49
back on. Yes, And that certainly doesn't mean that that's cash that they're
7:54
going to require for a down payment. I don't want to confuse people.
7:58
Liquidity is cash that we want to see your bank accounts that you have saved.
8:01
That will illustrate that responsibility. Other things are tips rather would be be
8:07
careful with personal expenditures prior to buying a practice, because practice underwriting combines projections
8:15
we have on the business that we understand very well a new orthodonic startup,
8:20
for example, but it also blends that with what kind of money is required
8:24
to go home for this doctor to live on and to pay their mortgage right
8:31
and to pay their bills. And so we do that math. That is
8:33
what the loan underwriting is partially responsible for. And so I always caution people
8:39
that if you have a dream for that monster mansion, can you put it
8:43
off for a little while, or maybe not buy the sports car or the
8:48
second home or what have you. And I don't want to tell people how
8:50
to live, but I can guide people on how to make sure that math
8:54
works before you buy a practice. And so those would be some examples of
8:58
just a few things I would encourage people to begin to get ready for prior
9:03
to applying. Yeah, that's such good information, and I feel like,
9:07
you know, those are the things that when I'm talking to doctors as well,
9:11
some of those components are the things that I have seen over and over
9:15
with not only Provide but other banks. You know, those are just kind
9:18
of our basic tenants of the things that we need to pay attention to.
9:22
And I'm curious. I think this goes with the credit score component. But
9:26
I've heard you say this before, but that revolving debt with doctors who have
9:31
revolving debt, is that something that they should also still be paying a lot
9:35
of attention to as well? Great question. So revolving debt could be an
9:39
example of a credit card, right that you have a balance on that you
9:43
maybe make minimum payments on, but it's there. The easiest way to tell
9:48
you, Jill, is they're going to subtract any revolving debt directly from your
9:52
liquidity. So whether you pay those off in advance and it lowers your cash
9:58
on hand, be careful because we still want to see a minimum amount of
10:01
cash on hand, right yeap, And so absolutely it's going to be a
10:05
net number. And I don't think I shared that number with you, But
10:07
since you talked about an orthodonic startup thirty to forty thousand dollars liquidity cash on
10:13
hand, we could also count securities we talk about stock. If people are
10:18
investing and have securities that are not in any way related to a retirement plan,
10:22
we can count those. Oh great, A lot of young borrowers have
10:26
bitcoin these days, and a lot of banks now are becoming more comfortable and
10:31
recognizing in some cases a percentage of that. Oh interesting, Oh that's that's
10:37
great. Starting to get more comfortable. A lot of the young borrowers is
10:41
very common Jill that they have a little cash a bitcoin that they'd like to
10:43
be recognized as being liquid. Yeah. Yeah, so yeah, revolving debt
10:48
is going to be kind of removed from that liquidity equation. Yeah. I'm
10:52
going to throw a curveball at you before we move on from this, But
10:56
I get asked this a lot, and I know you're the one who's got
11:01
the answer for it. Let's talk about cash gifts and how you know.
11:07
Let's say I've got a doc and they've got a family member, and I
11:11
see this a lot. There are some that are just really lucky to have
11:15
family members that want to help out in some way. And let's say we've
11:20
got a family member that says, hey, I've got X amount of dollars
11:24
that I would like to give you towards your business. Do you mind.
11:31
I know I'm going to take us on a rabbit hole, our rabbit trail
11:33
here for a minute, but can you kind of talk about that in how
11:37
that effects liquidity and should we try and have that gift done before we're reaching
11:46
out to the bank, and can that affect us if we have it done
11:50
after we have reached out. Can you kind of talk to that a little
11:56
bit h great question, Jill. Not a hard and fast rule in terms
12:00
of when that is executed, right, because sometimes we'll have people apply for
12:03
the loan and that's when we discover liquidity is an issue, and then we
12:07
can bring that up as an option and then they can go and seek that
12:11
during the loan application process, so it doesn't have to be secured in advance.
12:16
We welcome that. We understand sometimes, you know, having built that
12:20
liquidity while you've been in school for your entire life is sometimes difficult for folks,
12:26
particularly if they're applying directly out of residency, which is what we allow.
12:31
And so our underwriting certainly allows people to apply right away without work experience.
12:37
And so it's a chicken and an egg with how do you expect me
12:39
to save that money? Gifting money sometimes with a letter that says you don't
12:43
have to repay that, so that it's clear it's a gift, is certainly
12:46
acceptable. Yeah, great, Great, that's perfect. I just get that
12:50
question a lot, and I've never I've never known quite how except for to
12:54
say, hey, you need to talk to your lender about that and how
12:56
they view that. But I do think that sometimes times that is, you
13:01
know, when my docs are like, gosh, you know, I'm ten
13:03
thousand away, but that's going to put me, you know, another year
13:07
away from getting going. Sometimes that little bit of infusion of a gift from
13:11
a family member can make all the difference in when they're able to get started.
13:15
So sure, thanks for talking about that. So let's talk a little
13:18
bit about pitfalls and some of the things that you see when docs are coming
13:24
to you and applying for a loan that could maybe trip them up a little
13:28
bit. There's there's several you know, one thing we left out and kind
13:35
of those three or four things you can do to prepare are some of the
13:39
obvious like clean license, right, I mean. And it's interesting because those
13:43
three or four things we discussed about what can I do to get ready also
13:46
happen to be the initial hurdles of our prequalification. Those are the first things
13:50
we address because if you fail one of those three or four main hurdles,
13:56
credit score, cash, clean license, et cetera, you can't move forward.
14:01
Other pitfalls One might surprise you is, frankly, lack of vision.
14:07
Yeah, not tangible, but we'll have folks that come in ready to apply
14:11
for a loan and really don't understand where they're going. They don't have a
14:15
direction, they don't have a mentor they don't have an idea of what type
14:18
of practice they want or where they want it to be located, and so
14:22
it becomes difficult for the underwriters to get behind somebody if they haven't spent the
14:26
time. We conventionally our underwriting doesn't require business plans. Our SBA underwriting does,
14:33
but in the absence of a business plan, we still have to have
14:35
a vision. That's one. Tax obligations are another one that don't onays seem
14:41
obvious, but very often with approvals, if there's a tax obligation to the
14:46
federal government, they're going to want to see that paid off. And so
14:48
I would say, if there are plans, if you have a tax obligation,
14:54
let's get that reconciled or at least show that there's a plan in place.
14:58
Other pitfalls might be maybe not making a distinction between what a dental specific
15:05
partner could be, whether it's a lender or an advisor or a realtor.
15:09
I have a lot of people that try and surround themselves with folks that may
15:15
not have the experience in the industry, and that can create some challenges.
15:18
Sure, sure, yeah, I can see that. And I know when
15:22
I'm working with you know, startups, I've got kind of a step by
15:26
step guide that we work through, and there is something to be said for
15:31
bringing the right people in at the right times and making sure that we're working
15:35
and aligning ourselves with people who have the doctor's best interest at heart as they
15:41
are, you know, moving through. And I have seen it many times
15:45
where I will start working with the doctor who's kind of done a lot of
15:48
things on their own before we get started, and sometimes there's just a lot
15:52
of chaos going on, and you know, they're being pulled in a lot
15:58
of different directions and very stressed out, and maybe they're on this timeline that's
16:03
ticking down on their approval, but yet they haven't even figured out where they
16:07
want to be. And you know, so I think that it's important.
16:10
I love that you said that, because it is important to align yourself with
16:14
the right people and to make sure that you're moving through the process in the
16:18
right order. That's the way I look at it, so that it is
16:22
not out of control, but also that you've got the right guidance at the
16:26
right time by the right people. We welcome advisement and consulting experts like yourself
16:33
give us comfort because we know that our borrowers are not on an island by
16:38
themselves. They have a professional that can advise them not only in the clinical
16:41
aspect of the practice and the mechanisms inside of that, but some of the
16:47
financial aspects as well. So, yeah, that's important to us that they
16:52
have some advisement in tow. Yeah. Yeah, So let's talk a little
16:55
bit about I think is kind of the elephant in the room a lot of
16:59
times doctors, especially my younger ones that are coming right out of school,
17:03
and I think it's the student loan component. What is going to happen with
17:08
a loan If I've got student loan debt? You know, am I going
17:12
to be able to qualify? You know? Should I get in there and
17:15
spend my first five years paying off my student loan debt before I you know,
17:21
should I put my dream on hold because I've got X amount of dollars
17:25
in student loan debt. Can you talk a little bit about that and what
17:30
that looks like from your perspective on the banking side in regard to that.
17:36
Sure, it's a great question. And it's actually one additional pitfall that I
17:40
didn't address is that comes up a lot. We're all have a borrower on
17:45
an initial call with me, and they'll tell me how proud they are of
17:48
having paid off all their student debt, and then I ask a follow up
17:52
question, how much cash do you have? Well? None, I just
17:56
told you I paid off my student debt. So it's a little bit of
18:00
a catch twenty two. And so my advice is don't do that. I
18:04
understand that emotions can sometimes play a factor into that, and when you start
18:10
to have some income, maybe as a new associate, you want to start
18:12
paying that down. And I just want to remember advise you to remember that
18:18
the liquidity piece is more important. We accommodate the payments that people make in
18:23
student loans in our underwriting. We recognize it's going to be there, and
18:27
the cash flow generally can account for that. You're going to be okay,
18:32
and so I would say, temper that emotion, save your cash, and
18:37
let's address that after we get the practice kind of up and running. Because
18:41
I won't name names, but you and I both know somebody on the West
18:45
Coast that currently holds the record for me with over a million dollars in student
18:49
debt. And we approve that borrower for a large orthodonic startup loan, so
18:56
it can work, it can cash flow. Everybody's situations differ, So I
19:00
don't like to take a broad stroke here, but everybody is underwritten on their
19:03
own individual merit. But student loan, that's okay. We understand that it's
19:07
there and we'll account for it. Yeah, And I like to say,
19:11
you know, to me, it's not revolving debt like we might think about
19:15
it. Yes, it's debt, but there's a consistency to the payments.
19:18
There's a cadence to how it's going to be paid out. And you know,
19:22
I try and encourage my docs, you know, when they come to
19:26
me with this question. Again, I'm always pushing them to talk to their
19:30
bankers first. But there will be a point in your career where cash is
19:36
not a problem, and that's probably going to happen about five years ind where
19:41
things are really moving along, well, you're making good money, and that's
19:47
the point where you're really working with your financial advisors and saying, okay,
19:52
strategically, when we're looking at now wealth management and what that looks like for
19:56
me in the future, what's going to be my plan to get out of
20:02
debt to you know, start having extra money to invest in, you know,
20:06
whatever they may be looking at. And I think I think it's knowing
20:08
that there is a time and a place for everything. But it doesn't always
20:14
mean if you're getting ready to do a startup or you're getting ready to purchase
20:18
a practice, that the things that we may intrinsically think, oh, I've
20:22
got debts, so therefore I need to pay it off and put off my
20:26
future plans could actually be the very thing that keeps you from your future plans,
20:33
because you know, if you think about it, if you're able to
20:33
get in and buy a practice now five years from now, you're not worrying
20:37
about money. You know, if things are you know, done and set
20:41
upright where it could take you five years where you're still potentially a slave to
20:45
an associate ship job and then kicking the can another five years to getting that
20:51
practice open and being at a place where you want to be right and Jill,
20:56
this likely won't be their last loan. No, let's remember that.
21:00
We very quickly see folks do a second location, commercial real estate, sell
21:06
part of their practice to an associate that they brought on, do a ground
21:10
up project, and we finance all of those opportunities as well. And cash
21:15
is still king. Yep. Liquidity doesn't go away for those loans. As
21:19
a matter of fact, it may become more important than ever. And so
21:22
the advice I give kind of that mid career owner who's owned and operated for
21:27
five six years and calls me and says I want to buy a building and
21:30
move into it, or I want to do a second practice, how much
21:34
cash they have becomes even more important at that point, and so cash being
21:40
king does not go away. Keep a healthy amount in the practice, obviously,
21:44
and post COVID, I think we're seeing people be more responsible with how
21:48
much they keep on hand in their practice account and keep a generous amount just
21:52
readily what we call liquid. And that's going to enable borrowing power in ways
21:57
that would be difficult if you didn't have it. So it doesn't go away.
22:00
Yeah, I cannot agree with you more there, and again it's being
22:04
strategic in what you're doing and what your goals are for sure. So I
22:10
want to talk about a hot topic that I am hearing a lot, and
22:14
that's the size of loans that we're doing today, even to when we last
22:19
did our podcast a couple of years ago, to what I have seen in
22:25
you know, the last eighteen years to wear our practices, you know,
22:27
I can I can think back to when it was like, oh my gosh,
22:32
if we're getting a five hundred thousand dollars loan for a startup, man,
22:34
we are at the top, you know, like that is nuts.
22:38
So I want to talk about the loans now, and for docs that are
22:44
listening, this is where I really want you guys to hear me on this.
22:48
That I love it that you all crowdsource. I love it that you
22:52
are out there in your Facebook groups and your peer groups. But you have
22:57
to understand that even somebody who has done a loan and you know, started
23:03
their practice even three years ago, we're in a very very different place.
23:08
And the thing I want people to hear me say is that it's not that
23:12
the practice that we're doing is we're just spending money freely, and we're just
23:18
being frivolous with our money. It truly is where our industry is at right
23:23
now. And so if you're getting the advice and I know Steve, you're
23:26
going to talk to this in a minute, but if you're getting the advice
23:30
that, oh, my gosh, you're horrible and thinking that you're going to
23:33
do a startup for you know, more than five hundred thousand dollars or six
23:37
hundred thousand dollars, docs, I want you to hear me. You're not.
23:41
This is where we're at, and a lot of this has to do
23:42
just with our construction costs. So I'm going to let you take it away.
23:45
But I just had to put that in there because I'm hearing it over
23:49
and over and over again where I feel like a lot of our young docs
23:52
are really getting beat down by their peers because it has nothing to do with
23:57
like somehow they're doing it and they're not. It's just it's just where our
24:02
industry is at. And even the banks recognize it at this point. And
24:06
you and I both know there was a lot of conversations about we've got to
24:08
raise these limits, these ceilings are too low for where we're at right now.
24:14
Yeah, you make great points, and that five hundred thousand dollars startup
24:18
loan sat there for like a decade. It didn't change and life changes around
24:23
it. And what's challenging Jill is there's not an easy answer because different parts
24:29
of the country are very different, and even within the regions, you know,
24:33
costs can vary if you're in an urban area versus a rural area.
24:38
The rural area doesn't necessarily mean it's less expensive. I have a situation where
24:42
the construction in that particular situation is way higher than it would be in a
24:47
city. So every project's different, right, But to break it down very
24:52
simply with math, let's just say an orthodonic startup loan today is probably seven
24:57
eight hundred thousand, and if we use eight hundred thousand as kind of a
25:03
good benchmark for what we're targeting most of these people today, let's break that
25:07
down further. Of that eight hundred thousand generally, and this may vary bank
25:12
to bank, one hundred thousand dollars we'd like to call working capital, and
25:18
that can be used for what we call soft cost Some overhead. Maybe once
25:22
the practice is open. Consulting services certainly marketing reimburse themselves for some out of
25:29
pocket maybe they had to pay an attorney. Those are dollars that are not
25:32
intended to be for the hard construction and equipment. So we have seven hundred
25:37
thousand dollars left. Let's say it's about a twenty two hundred square foot space.
25:41
That seems pretty common. You mentioned cost of construction that can vary a
25:45
great deal, and that's really really a good question that some of your young
25:51
Orthodonis can start asking in their community is to find a good dental specific contractor
25:56
or find somebody who knows one, and to ask, what is the cost
26:00
per square foot YEP for construction to build an office, to build an orthodonic
26:06
office, And they know exactly what that number is. But if I'm to
26:08
say to you that number is two hundred dollars a foot, which would be
26:12
very reasonable, Jill, I've seen more, if not low, right now,
26:17
I've seen a higher. But let's use that number in our example,
26:19
twenty two hundred square feet word at about four hundred and fifty thousand construction dollar
26:25
needs YEP. Two hundred and fifty thousand dollars is left for equipment, and
26:29
those three things add up to eight hundred thousand. So those are three buckets
26:33
I shared working capital. We don't want to touch it in about in this
26:37
case, seven hundred thousand left to build that orthodonic office yep, all inep.
26:41
And that will include contractors and equipment, vendors, computer technology, it
26:48
right, furniture and all those things that you need to get that up and
26:51
running. And so those numbers can vary. There's things that will help subsidize
26:56
these projects that we could talk about rabbit holes. Something called a tenant improvement
27:00
allowance, and that is a bucket of money that a landlord is willing to
27:06
give you because you're improving their commercial real estate. Essentially. Now they'll bake
27:11
that into the lease and probably get that back from you in some aspect,
27:15
but it's a way for them to give money to you during the project that
27:18
just simply relieves how much you need from me. And so that little math
27:22
exercise I did, I'd like to have that conversation with people on the phone
27:26
immediately. How big of an office are you looking to build? Do you
27:30
know what the square foot cost is to build that? In your area,
27:33
and if not, let's begin working on that right now, because that will
27:37
lead us into how much money do you need? And I'm the first person
27:41
that doesn't want to loan you more money than what really is necessary to make
27:45
a success out of this practice. And so that's where we have to start
27:48
getting some other people involved, Jill, and we might need your opinion on
27:52
this. I might need to get in contact with the local realtor that you're
27:55
working with. Yep. I want to talk to the contractor and find out,
27:59
you know, what is it really costs to get this billed. There's
28:00
a lot of moving pieces there, but you asked a really good question.
28:03
So seven to eight hundred thousand, some cases more is perfectly normal. Yeah,
28:11
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excellence. And I think, again, it's so interesting because I have come
29:04
from you have two you know where even at the five hundred boy that was
29:08
we were like, oh my gosh, this is nuts, you know,
29:11
And I just want to say, just like fifties, the new forty eight
29:15
hundred is the new five hundred. Docs. So if you're hearing your peers
29:18
out there telling you in the Facebook groups, you're nuts, You're crazy.
29:22
How can you be doing a startup for eight hundred thousand? You're spending too
29:26
much money. The reality of it is primarily most of that is being driven
29:30
from your construction costs. And there are just you know, our trades right
29:34
now. I always like to remind my docs that, you know, as
29:37
we went through COVID, there's one industry that did not shut down and has
29:41
not been hungry for a lot of years, and that's construction in knowing that
29:47
it's even hard for us to get negotiated bids anymore or go through the bid
29:51
process with our contractors because a lot of times, like why am I even
29:55
going to take the time to bid this, I've got so much work out
29:57
there right now that is it's not even worth my time to really try and
30:02
be super competitive in this market. So thanks for kind of shedding a light
30:07
on what that loan is going to look like. I'm going to throw another
30:10
curveball at you, because I get asked this a lot from my docs,
30:14
and I'd love to hear kind of what your thoughts are. I'll tell you
30:18
my thoughts on it as well, but I have a lot of docks that'll
30:21
say, Okay, Joe, it kind of gives me heartburn to take out
30:23
an eight hundred thousand dollars loan, but I get it, I hear it,
30:26
I see it. Okay, we'll do it. But if I can,
30:30
I want to try and put as much of my own money into this
30:34
project, and I'm kind of curious to know what your thoughts are. I'll
30:41
tell you my thoughts on it, but if you would advise docs to kind
30:47
of shelter under the umbrella of the bank loan and worry about paying it off
30:52
when they know they're kind of out of the weeds, or if you would
30:57
be advising docs to you really only use as much as you absolutely need and
31:03
if you can not shelter under the bank loan. And I know this is
31:08
kind of a tricky question, but I get asked it a lot, and
31:14
I'm just kind of curious what your thoughts are on that. It is a
31:17
tricky question because I mean, people are free to put money into a project,
31:21
right, but you better have a lot of money because we want you
31:22
to have a minimum amount of liquidity to begin with. I tend to think,
31:27
like, leverage the bank. Let's let the bank finance this, save
31:30
your money. You're going to have other things that you're going to want to
31:33
use that for, maybe even personally, and take advantage of this one hundred
31:38
percent financing, you know, fee free loan that you can accelerate payments on.
31:44
Because if we use that eight hundred thousand dollars loan, what does that
31:47
really mean. Well, when you consider the structure of these loans, it
31:51
might be two years of interest only payments at thirty five hundred dollars a month.
31:56
You get the practice up and running and it's successful, and your principle
31:59
and interest payment might be seventy five hundred at that point in year three,
32:02
and then you can make additional principle payments and accelerate this loan jill, so
32:07
you don't have to pay it over a twelve year period or a ten year
32:10
period or whatever that is, and you can start crushing some of that once
32:14
the practice is up and being successful. But I don't often see people inserting
32:17
their own cash into these projects because they don't have to, and you don't
32:22
have to spend it all. If we approve you for a certain amount of
32:24
money, we certainly hope that you take some earnest approach to your budget and
32:30
maybe you come in under that, and that's what your loan actually ends up
32:32
reconciling for. And so your loan approval is really kind of a maximum amount,
32:37
so to speak. It doesn't mean you have to spend it all.
32:40
But I advise people to hang on to your cash if you can. Yeah,
32:44
yeah, And I think they also have to be very careful about if
32:46
they are going to spending it down and just making sure that the bank knows
32:51
what you're doing with your money that's set aside to satisfy the closing. Where
32:58
you know, I've seen a lot of docs that kind of get a little
33:00
out of step where they start spending down that ear marked money that has to
33:05
be sitting there for the loan to close, and then they kind of get
33:08
themselves into some issues. So that's great, that's you know, the exact
33:12
same advice I give doctors to like, you know, I use the phrase
33:15
use other people's money. Yes, it's your loan, but it's under the
33:19
umbrella of the bank, and you just never know, Like you said,
33:22
cash is king, and we never know when we're going to need that cash
33:25
or you're never going to know when there could be another opportunity, another investment
33:30
opportunity that comes available that you may not have access to if you don't have
33:34
that cash sitting there. So let's talk a little bit about startups or doctors
33:39
who are wanting to buy a building or buying land when they're getting started,
33:45
because I'm seeing more and more doctors that are leaning in this direction, and
33:50
I actually encourage it, you know, especially because of how high our rent
33:55
rates are right now, we talk about how high construction is right now,
34:00
I both know even those parameters that we used to have in place with this
34:04
is kind of the ceiling for where we want your rent at has even changed,
34:09
because I mean, gone are the days where you're going to get into
34:14
a practice, very very unlikely for twenty dollars a square foot and rent with
34:20
a you know, three or a five dollars triple net. We're easily looking
34:23
at forty dollars a square foot with seven to eight dollars in triple net,
34:29
depending upon, of course where we're at. So I'm kind of curious if
34:32
you can talk to what that looks like when a startup is looking at buying
34:37
a building or buying land versus maybe going down the lease route. Absolutely,
34:44
and you're right it has changed a little bit. But let's look at it
34:46
from the bank's perspective. First startups are first time practice owners, and so
34:52
banks historically have not supported conventional real estate loans with a startup, and again,
34:58
common sense tell you it brings more risks, and so if a practice
35:02
fails in a lease, it's probably a little bit easier to untangle that for
35:07
all parties than it is if we have a building loan tied up against that
35:09
practice as well. We are practice finance people. The practice is always kind
35:15
of the earth. Real estate's the moon. We love commercial real estate lending
35:21
and we do a lot of that for our private practice owners because to your
35:23
point, a lot of people recognize the value in owning their own commercial real
35:28
estate because in a startup loans underwriting, we have to use kind of a
35:32
placeholder for rent as we approve these loans because we may not know where that
35:37
doctor is going to finally locate, so we put a number in there.
35:39
And you're right, Jill, I mean we're seeing rent in some communities that's
35:44
nine ten thousand dollars a month. And if I'd say to you that the
35:47
mortgage on a million dollar building is less than that, then buying commercial real
35:52
estate financially sometimes makes a lot of sense. So it's not prohibitive. A
35:57
lot of people come to me thinking that it is, oh, you would
35:59
never or loan me money for a building on a startup, because it's now
36:02
I'm at two million dollars. It's not the size of it. You're going
36:05
to be paying rent or you're going to be paying a mortgage. And if
36:08
we can secure it with real estate and have that collateral ourselves. Why wouldn't
36:14
the bank be supportive of that if your practice is a success. But it's
36:16
not very common, and I don't always support it for a startup frankly,
36:22
because you better be sure you're in the right location, right, So true,
36:27
that's one question. I mean a lot of startups don't know that yet,
36:30
and so that's kind of the nice opportunity of having a lease with the
36:35
ability to maybe not renew long term, have the ability to get out and
36:38
maybe relocate or maybe then buy a building in a couple of years once the
36:42
practice is a little healthier. That's generally the path I support, Jill.
36:46
I mean, I don't try to be their advisor, but and I like
36:50
doing real estate loans, but I think for a startup, it really has
36:52
to be the right situation. I think you have to know it's the right
36:55
location. You have to have a very strong borrower with a lot of cap
37:00
Commercial real estate absolutely is an option for a startup, it's just not that
37:04
common. It may require some cash for a down payment, whether it's a
37:07
portion of the conventional commercial real estate loan. We also have startups that do
37:13
ground up projects if you can believe that to the tune of three or four
37:17
million dollars by the time you're done, and that's possible through maybe an SPA
37:22
opportunity if conventional lending can't support that cash flow. So it's not uncommon for
37:29
dentists or physicians or veterinarians with a little bit of money down to do some
37:35
of these larger projects, like with real estate or ground up. I don't
37:38
always recommend it. We have to really make sure that it's the right person
37:43
and the right situation. But you know, reasonably sized buildings, Jill,
37:47
I mean, I have another situation where, unfortunately there was a doctor that
37:52
passed away and left a small condo that's fully equipped and plumbed, no patient
37:57
base, it's dwindled. Barrower has the opportunity to buy the condomentium for a
38:01
half a million dollars and then they only needed like another one hundred and fifty
38:06
for some working capital and some paint, yep, yep. And that's a
38:09
real smart opportunity to approve a building and a practice. So everybody's situation is
38:15
different, and again I just want to make sure they know that it's absolutely
38:19
possible. You just have to be very clear about what the opportunity is.
38:22
Yeah, and what great advice. And I think that planning on the forefront
38:29
of it and asking the questions and making sure that you're clear in your direction
38:35
is the first start there, because it may or may not be the right
38:38
opportunity. But I cannot agree with you more that just saying, oh,
38:42
I want to be a building owner and I want to own a practice.
38:45
There's a lot that goes into that. And I love that you said demographics.
38:50
You know, it starts with making sure that you know for sure that
38:54
your practice is going to be successful in the area that you're picking. And
38:59
you know, when I'm working with Dog, we spend a lot of time
39:00
looking at that baseline information because you know, the last thing we want to
39:07
do is spend you know, eight hundred thousand and just the build out of
39:10
our practice and then know, well, gosh, you know, I've got
39:15
less than a fifteen hundred patient base opportunity and less than forty percent of the
39:21
people in my area own and you know, our median income is less than
39:24
sixty thousand. That's going to be a a tough market. You don't compared
39:30
to much better demographics. So knowing all of those things can make a big
39:34
difference in that I know that's a little bit of a out of the box
39:37
question in regard to we haven't seen that as much, I don't think in
39:43
the last five years, but I'm seeing it more and more and I'm having
39:45
more and more doctors ask about it. And I just really think it has
39:50
to do with the fact that you know, when they're plotting out the numbers
39:53
on what a ten year lease looks like and what they're paying, a lot
39:58
of times they're going if I happen to be that person, and that was
40:02
something I had always been looking at, is it worth me at least asking
40:06
the question now? Maybe it makes sense, maybe it doesn't, But I
40:09
think getting in front of the right advisors can help you make those decisions.
40:14
And I say it's always worth asking. It's always worth talking about. Rather
40:16
you close the door than have the door closed on you. Absolutely, and
40:22
for acquisitions too, Jill, it's very common for buildings to be sold right
40:25
along with the practice. We're happy to do that. Or another strategy is
40:30
you have a borrower buys the practice with first right of refusal to purchase that
40:35
building in the future. And I think your listeners need to remember that often
40:38
these loans for the real estate and the practice are separate, they're independent,
40:43
they're tied to different entities. And so as a clinician, you can sell
40:47
your practice and you can still own the real estate. Yes, And so
40:52
there's a lot of flexibility with how you can structure these things, depending again
40:55
on what your vision is. And so those are the conversations we have.
40:59
Really the important conversations aren't about the loan. It's really about what do you
41:04
want long term because some of the decisions and that's probably one of the other
41:07
really good takeaways here. There's a mistake that doctors make is they choose a
41:12
lender based on some criteria that does not include what their future goals are.
41:17
Yes, And what I mean by that is, you may have a bar
41:22
wer that fully intends to own three practices, but they failed to choose a
41:27
bank in the beginning that had that same ambition. And so I get a
41:30
lot of phone calls from doctors that say, Gosh, I'd love to buy
41:32
a second practice, but the bank I'm with doesn't want to do it.
41:37
And so I would challenge your listeners to ask those questions about like how do
41:42
you guys feel about real estate or how do you feel about multiple locations,
41:45
because a lot of today's practitioners are like that, Jill, you know,
41:50
they want multiple practices. It's a little bit different than the way it was
41:54
a long time ago, but we like that too, and so you have
41:58
to make sure that you're asked those questions with whatever lender you're interviewing now,
42:01
is do you fit who I'm going to be in the future. Can you
42:06
lend to me with my future needs? Yeah, that's great. So let's
42:09
talk a little bit about just the team when we're looking at moving through this
42:15
process. And you know, let's say somebody's given you a call, Steve,
42:17
and they had this great conversation with you, and they're saying, Okay,
42:22
I think I'm going to move forward, you know, with provide they're
42:25
going to be my lender going forward. What does it look like who's involved
42:30
from the initial call to the closing of the loan, Because I think sometimes
42:37
we think I talked to Steve, so Steve therefore is the one who's approving
42:40
me, and he was great, and so this is all said and done,
42:45
But I'm kind of curious if you can just kind of peel back the
42:47
layers of what does the banking team look like? Like? What are what
42:52
are the different divisions that we're going to be working with. You mean,
42:54
it's not just me coming out with my trow vot. I would love it
42:59
if it was. I can put up drywall. I can put up drywall,
43:02
I can install dental chairs. I do the whole thing. I do
43:06
the whole thing. I put on a tooth costume. I'm dancing out on
43:09
the street to the open. I wish I wish that I could do that
43:13
too, wink wink. We can't be all things, and so my role
43:19
here is really to be kind of the tip of the spear, right.
43:22
I'm the first person that your doctors are going to talk to. I'm the
43:27
one that's going to be here in the beginning. I'm going to be here
43:30
in the very end. And so it kind of begins and ends with me
43:32
and you know that. But I have a team and it's not just me,
43:37
and I like to tell doctors at the end of the project, I'm
43:39
going to look at the software we use called Slack. A lot of people
43:43
know that we build a project around each doctor and different people that provide become
43:49
attached to that project based on their skills and what their role is here.
43:53
And at the end of a project, there could be thirty five people from
43:57
Provide that are attached to this and know that doctor, working with that doctor.
44:01
And so it begins with me, and then it moves into a closing
44:06
coordinator who helps them get it open, then a project manager who helps work
44:10
with the contractors and paying the bills. They may have an insurance expert that
44:15
helps them along the way. They're going to have an underwriter that's making sure
44:20
the math works throughout the project. We have enough money there and everybody's doing
44:22
okay. They're going to have a personal healthcare banker that they have a cell
44:28
phone for that's going to help set up credit card processing and the Provide credit
44:31
card and all those banking systems that we remind people we don't go away.
44:37
Fifth Third Bank wants to be your partner in business banking for years to come.
44:40
So that's a new partner that you're going to have. And so even
44:44
at Provide, I may have a dozen people on my team. They're going
44:46
to work with you throughout this project. And that doesn't include the people that
44:50
are on site in your project in the field. Yeah, and so dozens
44:54
and dozens of people will be involved in this, so picking your right team
44:59
is blicky. Yeah, yeah, that's great. And I think again,
45:02
it's just nice to hear that because I think we know that there are other
45:07
people, but I think a lot of times we think there's just one or
45:09
two people, and it's it's nice for you to kind of open that up
45:14
for us and be like, Okay, you know there is somebody dedicated to
45:17
just paying those invoices that you know, you approve, and there's somebody that's
45:22
just dedicated to making sure that, like you said, the money is being
45:25
managed. I always tell my dogs there are a lot of people that want
45:29
to spend your money. They hear doctor, and they think money's no object
45:34
to you. And really, we all know, if we're working within our
45:37
budget that eight hundred thousand seems like a lot, it's not a lot.
45:40
Every single penny counts, and we want to make sure that we're being really
45:45
smart as we're working through it. So as we're you know, kind of
45:49
finishing up here, I'm wondering if you have any final pieces of advice or
45:54
loan wisdom that you want to drop on us. Yeah, I said it,
46:00
and it's always don't do it alone. It's a challenge for me when
46:05
I have doctors come to me. I can offer a lot of advice.
46:07
I've worn different hats, but at the end of the day, I'm probably
46:12
not the best advisor. I'm not the best at all of these areas of
46:15
expertise, and so I will often encourage my doctors to start to build a
46:21
team. And it depends on their situation, but it might include somebody like
46:24
you. It will include a very dental or orthodonic specific vendors, be it
46:31
realtors or contractors, or insurance people or that equipment people. That list goes
46:37
on and on and on, and I think that's probably the most important thing
46:40
for me, is that they understand they need to trust. Yes, I
46:45
think that's hard sometimes. You know, you have to find people that are
46:47
really good at what they do and let them do what they do and make
46:51
them talk to each other too. That's really important. And so that's the
46:54
biggest piece of advice I can give anybody as they approach getting alone. Getting
46:58
a loan is not that hard. That process itself is pretty quick. They've
47:04
worked very hard to become an orthodonist. We recognize already what that brings to
47:07
the table, and so it's everything that happens after I think. And if
47:13
you ask doctors what they thought was really important when they began to get the
47:16
loan interest rate, and then what they thought was really important at the end
47:23
of a project, they would tell you different things. Agree and they would
47:28
tell you about people at that bank or their advisors or people on their team
47:32
that help them through challenges that has made them become friends now and that's what
47:38
you hear at the end of these projects. Or I had no idea what
47:40
went into this, and so that project management team. I'm super proud of
47:45
ours that provide. Like that's a really important question too, like who's going
47:50
to be with me through this and what does that look like? Who's your
47:52
team so it's not just me? Yeah, great advice for sure. Well,
47:57
if somebody wants to get a hold of you, what's the best way
48:00
can get a hold of you? Reach out to provide. Yeah, so
48:02
a seven two zero five five zero two five six seven, call my cell
48:07
phone Steve dot Steinbrunner at get provide dot com. Perfect. You can find
48:15
me on the Provide website or on the Hey Docs videos. Yep, for
48:19
sure. Well, Steve, it's always a pleasure. You are definitely my
48:22
go to guy when I've got banking questions, I've got something that comes up,
48:25
and I always appreciate it too. Just on a personal note, when
48:29
I've got a doc that's working with you, and if we ever have things
48:31
come up, I know you give out your cell phone to you know,
48:35
everybody here. I know you are a textaway and we'll get right back to
48:39
me to help solve the problems. So thanks for what you're doing in our
48:43
industry. Welcome. So as we finish up, if you remember from before,
48:46
I like to finish up with the little speed round. I've got new
48:50
questions for you. Are you ready? I thought they were going to be
48:52
the same loans I practice. I practice the old ones. No, no,
48:58
of course not. We're gonna We're gonna change it up. Bring it
49:00
in, bring it on. Okay, what's your go to productivity tool?
49:07
This isn't that exciting, but it's good old fashioned Excel spreadsheets. I live
49:12
you know, I'm a banker kind of guy, and I live in Excel
49:15
spreadsheets. Working on budgets for doctors they're looking to do projects like without that,
49:20
I'm in trouble. Yep, I can appreciate that. Are you an
49:22
early bird or a night owl? Oh? Early perfect? And the older
49:28
I get you earlier. It is. It's I'm productive in the morning,
49:31
and I'm lucky that I work with people across the country, and so there
49:36
may be some East Coast provide team members or customers that are two hours later
49:40
than me. In the morning, I can get to work yep. And
49:44
yeah, mornings are good. And likewise, you know, you try and
49:46
find me at night, you probably won't have much luck because I'll turn in
49:50
early. Two bad West Coasters. I'm on a bike trail. What was
49:57
your first job? My first job lawndlowing business. Yeah. I was a
50:02
little kid that was pulling a lawnmower behind me during the summer, and I
50:06
had a want of cash and would mow lawns and advertised for it and had
50:09
my own little business when I was little. That is great, all right.
50:13
What would you say has had the most impact on your professional life?
50:16
Oh? Well, professionally, I've been in the dental industry for thirty years.
50:22
I've worn a lot of different hats. I've had different roles in this
50:25
industry, but none of it would have happened if I passed up that interview
50:30
with a dental supply company in nineteen ninety three when I was in college.
50:35
Not cool, first and only interview I really did, and I ended up
50:38
selling dental supplies and the rest is history. I love that, all right.
50:43
And to finish us up, one business skill, you think everyone should
50:45
have how to ask really good questions. Yeah, that's a good one.
50:52
I think that's underrated. And I think anytime we're dealing with whether it's a
50:58
patient or with a doctor or really anybody, I thinks slowing down and really
51:05
thinking about what's important to them and can I ask the right questions to try
51:08
and figure out how to help. Yeah, yeah, I cannot agree more.
51:12
That's great. Well again, Steve, thank you so much for being
51:15
on the show, and enjoy your summer and until next time. Absolutely I
51:22
look forward to the next one. Thanks Joe, Yeah, thank you.
51:23
Sia. Are you ready to start a practice of your own, need a
51:29
new fresh set of eyes or some advice on your existing practice? If so,
51:32
reach out to me Jill Allen at www dot practice results dot com.
51:38
If you like what we're doing here on Haydocks and want to hear more of
51:42
this awesome content, be sure and give us a five star rating on your
51:45
preferred listening platform and subscribe to our show so you never miss an episode.
51:52
Remember, new episodes drop every Thursday. See you next week.