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Have you applied for a practice loan in the last year? Will this be your first time applying for a practice loan? 

The fact remains that it can be a daunting task that can raise your anxiety levels. The purpose of this article is to provide some best practices for successfully applying for a practice loan in order to reduce the amount of anxiety that comes naturally with the loan application process.

Step 1- Preparation

In order to apply for a practice loan, you must understand that most banks have very similar underwriting requirements when conventionally (non-SBA) lending to doctors. Although the ultimate loan approval lies squarely lies with the bank’s credit underwriter, your loan officer can help guide you through the process of applying for a practice loan.  Some of the most common loan underwriting requirements include:

  • Personal FICO credit score of approximately 680 for credit approval
  • Personal FICO credit score of approximately 750 or greater for best interest rate
  • No Foreclosures
  • No Bankruptcies
  • Between 10-20% Liquidity (Cash, Checking, Savings and other Non-Retirement/Stock Market Accounts)
  • Low credit-card debt
  • Managed student loans

Step 2- Loan Application Process

Once you meet the general loan application requirements, you can now formally apply for a practice loan. During the formal application process, it’s important to work closely with your loan officer as they control the speed in which your loan package is processed.

A good strategy when applying for a practice loan is to apply for multiple practice loans from competing banks at the exact same time, ideally, you will apply to two yet no more than three banks consecutively. This will speed up your loan application process since most banks are going to require the same financial documents in order to render a credit decision.

So you can take one weekend morning or afternoon to apply to two to three banks at the same time versus applying to one lender and then waiting a few days to a week later to apply to another financial institution. Some of the most common financial documents include:

  • Last 2-3 years of personal/individual tax returns (ext. 1040)
  • Last 2-3 years of corporate tax returns (ext. 1120)…For existing practice owners
  • Fully completed and signed loan application
  • Most up-to-date Profit & Loss (P&L) statement
  • Most up-to-date Personal Financial (PFS) Statement
  • Driver’s license
  • Curriculum Vitae (CV)
  • For startup doctors, you may be required to submit a business plan for certain banks

Step 3- Credit Decision

Now you have met the general loan requirements and have formally applied for a practice loan, it is very reasonable to receive a credit decision in 5-7 business days.

After applying for the loan, if you receive an approval from one loan officer, congratulations! You will more than likely be approved by the other banks you applied to as well. If this is the case, a best practice is to notify all loan officers about your approval in order to receive the best rate and best terms.

Now, if you are declined by one of the banks, this does not mean that you will be declined by the other banks. Please understand that you should NEVER take a bank decline personal. A bank decline can be mitigated (resolved) if you work closely with your loan officer to identify why you were not approved. Some of the most common reasons for a loan decline include:

  • Low liquidity
  • High credit card/revolving debt
  • Negative actions on license
  • Missing/incomplete information on an application

Again, it’s very important to work closely with your loan officer during the credit decision process, as they are instrumental in rendering your credit approval and or credit decline. All declines can and should be formally mitigated with your loan officer to ensure the credit underwriting team has all pertinent and up-to-date personal financial information.

In certain instances, credit declines CAN BE reversed to credit approvals and or the loan officer can provide you with information about what is required from their loan department in order to get you loan application approved at a later time.

In conclusion, the fact remains that it can be a daunting task to apply for a practice loan. This article was meant to provide some best practices for successfully applying for a practice loan in order to reduce the amount of anxiety that comes naturally with the process. The key is to work closely with your loan officer throughout the entire loan process in order to speed up the application and credit decision stages.

Darren Jackson
Associate Editor, Finance for odsonfb.com. Darren Jackson is an OD Practice Startup & Growth Specialist. He is a 13-year healthcare industry veteran. Upon graduating from Salisbury University in 2004 with a degree in Business Administration, Darren joined Pfizer Pharmaceuticals as a professional healthcare representative. Darren spent 8 years in the pharmaceutical industry where he worked as a territory and product sales manager for Pfizer, Schering-Plough and Merck Pharmaceuticals. In 2011, Darren joined Bank of American Practice Solutions, where he helped launch Bank of America’s Optometric and Medical division. Darren spent 5 years at Bank of America Practice Solutions, where he was able to help ODs throughout the country start and grow their practices. Darren has many friends and clients in the optometric industry and spends the majority of his professional time helping doctors start and or grow their practices. Darren is currently Vice-President and Business Development Officer for Wells Fargo.

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