Want a Good Practice Loan Rate? Make the Banks Negotiate FOR You

Buying a dental practice means securing a loan. (Unless you have a spare million or so bucks lying around.) And that means negotiating with the banks.

“Negotiating” is just one of those words. Like “networking,” I know that when I mention negotiating, I’m going to get looks that usually range from reluctant to terrified. “Negotiation” calls to mind confrontation, argument, and discomfort for most of us.

The reality is usually very different.

Negotiating for a practice loan is actually pretty easy … if you do it right. 

Here’s the first trick: Just make the banks do the negotiating for you.

When shopping for a practice purchase loan, don’t just go with the first and only bank you talk to. Reach out to multiple bankers (we know people) and let them know you’ll be looking for a loan. The idea here is competition. If you only have one bank in the mix, they have all the leverage. You don’t have another offer to fall back on, so they’ll be able to set terms and fees that favor the bank, at your expense.

So what do you do? Go out and contact every banker you can, right? Wrong. 

That brings us to the second trick: Don’t overdo it. Keep it to only a couple of banks. Possibly three, usually two.

Wait, you may be thinking. If it’s about competition, then the more the merrier, right? Why not approach five banks and watch them cage fight for your loan? Because it doesn’t work that way.

Put yourself in the banker’s shoes. You work on commission. You have a lot of irons in the fire, lots of dentists who might or might not choose you, and so you’ll concentrate your efforts on the most promising ones. If you’re competing against one or two other bankers for Dr. Smith’s loan, you’ve got good odds that the dentist will go with you. You’ll work hard to negotiate with your own bank behind the scenes to get the dentist great terms to make sure that happens.

If that same banker is competing with five other bankers on the same loan, they know their chances of success are much lower. It’s a numbers game for the banker: if they don’t see much of a chance with this loan, they won’t spend much energy trying to make it as attractive as possible. They’ll move on to the better bet.

So keep the circle small and those two or three bankers will do the hardest part of the negotiations for you. 

Of course, the essential part of this tactic is to make sure it’s two solid lenders who know how to work with dentists. That’s where we come in. After so many years in the game (and having worked for big banks in the past), I know the industry, I know the banks, and I know the bankers themselves. Even better, I was smart enough to hire Brian Tomono, a former banker with more than 20 years of healthcare lending experience. Meet him here.

When you hire Dental Buyer Advocates, you’re doing it because we’ll set you up with the best resources, including lenders. Give me a call if you want some referrals or suggestions, or just need to know where to start with all this.