The thought of seeking a practice loan for a new dentist might be intimidating. But being prepared with good information can prove to be key to an easier—that is, successful—experience.
Allison Farey, president of Wells Fargo Practice Finance, named good credit as the No. 1 criterion that a new dentist should meet before seeking a practice loan. Ms. Farey said that a FICO credit score “north of 700” is a good place to start. While that means being in good standing with student loan payments, for instance, it doesn’t mean that heavy student loans themselves will be an issue.
“That does not matter whatsoever when we’re analyzing the doctor for a practice loan,” Ms. Farey said. “We do not factor in the debt load on the student loans because we know they have them, and we consider that good debt. But what does matter is if they buy really fancy cars or large houses with big mortgages on them. That will have a big impact.”
There are a few distinctions between buying an existing practice and establishing a startup that should be noted. But from Wells Fargo’s perspective, one approach does not trump the other.
“We don’t judge them as one is better than the other,” Ms. Farey said. “What we look at first and foremost is the character of the borrower or dentist. We do that through their credit. If it’s a startup, we’re looking at your business plan.”
But as a preliminary step, Wells Fargo will help the applicant get the plan in good shape prior to their application, Ms. Farey said.
“We’re really looking to help set up a business plan with them and give them the tools to do that,” she said of new dentists. “We refer them certainly to the ADA to also pull tools down for them to reference in building a business plan, etc. We have some practice management consultants on staff that may have a conversation with the doctor, to make sure they’re ready to go.
“For the existing practice, we’re looking at the historical cash flow of the practice. We’re looking to make sure that the debts can be covered by the historical revenues that come off of that practice. So that’s a completely different way that we would underwrite a purchase versus a startup.”
Another major preparation step for a new dentist planning to seek a practice loan is to get all preliminary, self-assessment out of the way before applying for a loan, Ms. Farey said. “They need to be prepared by knowing where they want to be, not ‘I think I might want to do this or I think I might want to do that,’” Ms. Farey said.
But Wells Fargo can even help with those early steps, she said. New dentists may consult with her division to get help focusing their intentions, such as where they will practice. “They certainly can call,” she said. “We talk to doctors way back to when they’re students.”
To learn more about Wells Fargo Practice Finance’s programs for new dentists, visit wellsfargo.com/dentists or call 1.888.937.2321.