Like I said in last week’s newsletter, banks love dentists. If you’re buying a dental practice, every banker will want to be your lender. You could have multiple lending offers, and choosing between them can seem tricky. Hey, it’s a good problem to have! But you’ll still have to choose, so how do you do it? I’ll share a few thoughts.
How Many Banks?
You should be fielding loan offers from two banks, maybe three. If you only talk to one bank, they don’t have to compete for your offer. If you’re talking to five banks, they know their chances are slimmer, so they won’t fight as hard for your business. Two or three banks, though? Now they know they have a real shot at earning your loan, and they’ll compete accordingly.
Rates matter, but less than you’d think. Banks may have slightly different rates, but they’ll fall within a pretty narrow window along where the market is at. If one bank offers a rate of 4.99%, and another offers 4.79%, that second rate looks awfully attractive! And all things being equal, the lower rate should win. But all things are never equal, and that lower rate doesn’t translate to enough savings to overcome other aspects of the loan.
To give you an idea, with a $1M loan, that difference in rate would translate to less than $100 in the monthly payment and just over $10k over the life of a 10-year loan. That’s not nothing! But it’s also not worth sacrificing other aspects of the loan.
It used to be standard for banks to charge a 1% fee to facilitate a loan. Nowadays it’s more like 0.5%. How much do I think you should end up paying in fees? Zero percent. Nothing.
Those fees are a way for banks to recoup some cost upfront, rather than counting on the interest over the life of the loan. But do they need it? Nah. And they’ll often waive those fees when competing with other banks. It never hurts to ask, and if the bank insists on charging the fees, that 0.5% will end up costing you more than the 0.2% difference in the example above.
- The Process
Is the application process straightforward? What about the closing process? Is it simple to submit documents? How many people at the bank will you have to interface with, and how well do they know your situation? The banker should be able to give you a clear idea of what to expect from their process, and if you have any questions, that’s where your transition coach (me!) comes in. After thousands of these, I know what to look for here.
- The Banker
Your dental-specific banker should be knowledgeable, clear, and responsive. They should prepare you well for the underwriting process. They should work to earn your business, not assume it will just come to them.
Banks will sometimes try to rope you into certain requirements. “You must use us for your primary checking account.” “You must use our merchant services.” And so on. Negotiate these requirements out of your loan, or move on to another bank if they won’t budge.
When it comes time to choose a loan, there are a TON of things to consider. I’ve given you a few here, but there are plenty of factors that you can more or less ignore as well. Scroll down on this post to learn of some of those.
Ultimately, choosing the right loan is up to you. But navigating that decision isn’t something you have to do alone. Give us a call and our staff of specialists (including former dental lenders!) will help you make the right decision.