5 Questions to Ask Before Financing Your Dental Practice
Did you know that when you borrow $500,000 on a 10-year loan, the difference between paying 5% and 5.25% interest on that loan is approximately $7,500 over the life of the loan? That amounts to just $63 a month.
Now imagine that the lending bank requires you to keep a checking account with them and charges you a checking account fee of $30 a month ($3,600 over 10 years), plus they require you to pay extra closing costs totaling $7,000. All of the sudden, the bank with the lower interest rate is actually costing you more money!
When borrowing money for your dental practice, you need to evaluate the total cost of the banking relationship. To help your evaluation, be sure to ask your bank these 5 questions:
1. When I close the loan, will there be any other fees I have to pay that are not outlined in this proposal? This would include items such as legal fees and document fees. You’ll want to carefully consider all of the costs associated with the loan before making your decision.
2. Do you require me to obtain any insurance as collateral for the loan? Business property insurance is expected in order to insure your equipment. Additional coverage such as life insurance, disability insurance or business overhead insurance could be required. You definitely want to protect yourself in the event of catastrophe, but you shouldn’t be required to obtain more insurance than you and your advisor believe is appropriate.
3. Do I have to process my credit cards with you? This is an area where banks can charge high fees, which could offset any interest rate savings. That’s why you should shop your credit card processing to at least 2 companies to get the best rates (check processing rates annually, since companies are known to raise them over time).
4. Do you have an effective online banking platform and other resources available to me? More and more banking is done in your office to avoid trips to the bank and save time for your staff. Mobile check deposits, integrations with major payroll software and additional tools should be available to help you manage your accounts easily. Also, as a business owner, you’ll need additional financing, investment guidance, payroll services, business credit cards, and other products and services that your bank may be able to provide. Ideally you want to have access to all of these through your banking relationship.
5. What reward programs are available for small business owners? Once you pick a bank, you’re likely to remain with them for a long period of time. As your business grows, you want to be sure that your needs will be met and your loyalty will be rewarded. For instance, some banks offer rewards programs based on the size of your relationship with them.
After asking these questions, get the monthly costs and add them up:
|Banking relationship cost worksheet|
|Total cost of interest over the life of the loan:|
|Additional closing fees (attorney fees, document fees):|
|Monthly insurance premiums required x 120 months (10-year loan):|
|Monthly business bank account fees x 120 months (10-year loan):|
|Monthly merchant services cost or savings x 120 months (10-year loan):|
|Total banking relationship costs (life of the loan):|
The final number will give you an idea of the total cost of the banking relationship you’re considering so you can make your banking decision with 100% confidence.
Call 800.497.6076 to speak with a Bank of America Practice Solutions specialist to help you navigate the dental financing process.