Blog, Chirosecure Live Event August 7, 2023

Can You Bank on Selling Your Practice?

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Hey everybody. Dr. Randi Ross here at Premier Practice Consultants. Thanks for joining me here today. I wanna thank ChiroSecure for giving me the opportunity to share some really important information with you, that if you’re ever selling your practice or even thinking about what’s gonna happen when I sell my practice, There’s some important things that you might wanna know.

So why don’t we go ahead and go to the slides. If you are thinking about selling your practice, one of the things that you’re gonna have to be involved in, most likely. Is that you’re gonna have to deal with the bank, and so what is the bank gonna actually want from you? Some of this might seem a little bit mundane, but there’s some important pieces of information in here.

So one of the questions that I often get asked from a client, a seller, is why does it matter about me? Shouldn’t it really just matter about the buyer? And the interesting question is there’s definitely been a shift in banking over the years where it used to be really important. As to the buyer themselves and less important as to what the business, or we’ll call you the seller’s information is, but it’s really become a bit of a split.

’cause you can have the strongest buyer in the world, but if the bank does not like, The information provided about the business that they’re funding this, they may not like the deal and they may pass on it. So it’s really important to make sure that your finances of this, you, the seller, is very strong.

Just as important as the buyer coming along has to obviously be a strong buyer for a bank to have confidence in. They’re gonna get paid. So just to get started, here are some basic documents that every single bank is gonna ask for, whether it’s s b, A, or conventional, they’re gonna want three years tax returns.

Okay? So all of you that think that maybe you’re gonna sell your practice and you go on extension, I can tell you this time of year, if you don’t have your taxes done for 2022. A bank will not consider the deal until that’s done. So although extension might be a smart move at some points in time, it’s not a smart move if you’re thinking about selling your practice.

So three years tax returns, I. Three years, p and l profit and loss, as well as year to date. We’re more than halfway through the year. You can be sure they’re gonna wanna see what you’ve done in this case in 2023. Same thing for balance sheets. A lot of you don’t really even have balance sheets, but I can tell you it’s something that a bank is absolutely gonna want to see.

So you may have to go to your accountant. To populate these documents for you properly, but this is the basis and the very least amount of information that you will be requested to provide before a bank will even consider loaning money to the person that is buying your practice. And then there’s additional documents.

You’re going to have a purchase agreement that’s gonna ultimately have to be executed by both parties, but in the earliest stages, the bank will take it without it being signed. Has to be signed before the deal will close. The bank’s attorney will actually be reviewing that document. For certain details that they require to be in there.

One of those details is a non-compete has to be in there. Just so you know, s b A is a real stickler on this. They don’t like deals where the seller . Is staying for more than six to 12 months. They often will not even fund a deal like that. That’s a whole nother class that we can teach on the details of SS b A, but just a little tidbit of information there for you.

The other thing is a lease. They’re going to want to see that the buyer actually has a lease in place. . To continue using that office space for their practice. And a little nother SS b A note is S B A requires 10 years. Most people don’t know this. When I tell them this, they’re pretty shocked. And I talk S B A because majority of chiropractic acquisitions are through S B A loans.

SSB requires 10 years, so it doesn’t have to be a 10 year loan. It just has to add up to 10 years. So it could be a five year with a five year option, it could be a two year loan with four, two year options. Anything that adds up to 10 years, your current landlord or property owner is gonna have to be aware that’s gonna be required by the bank for you to move forward.

And the reason for that is the term of the loan for an S b A is 10 years. . So they wanna know that their buyer has the ability to have somewhere to practice for those 10 years so that they can actually be paid. Additional documents that you’re gonna need and you can really get all these things prepared, keep them updated, keep them what I call active.

More of a live document that’s always changing and updating your equipment list. Anything that is worth more than $5,000, they’re going to require serial numbers and they’re gonna check on that. Do you have any debt on the practice? Do you have any like an outstanding idle E I D L loan from back in the pandemic has to be paid off at closing.

If you still have that outstanding. Is your equipment leased? Transferring leases these days is a very difficult thing. Most of the companies will not do that, so you have to be aware of that. And are we actually just gonna include that and pay it off at closing, or are we actually asking for the buyer?

To acquire extra funds and adding that on so that can get a little bit squirrely at times. If it doesn’t come up initially, when you’re presenting the practice there is a laundry list. Of information that over the time of 3, 4, 5, 6 months, which is pretty much how long a bank loan will take, they will be requesting from you, and some of it really gets detailed to the things they see within your documentation that they want clarification on.

Or they just want additional documents. You have to be really patient. You have to know that it’s a bit of falling down a rabbit hole with a bank. I. They require a lot of documentation and a lot of information from both the buyer and the seller. So it’s important. I always tell people they’re gonna ask you for the something you already sent.

Don’t be impatient and send back a message that says, I already sent you that on, seven two. Don’t do that, just resend it. There are multiple layers and multiple people in each layer when they’re reviewing this information to get it to a closing, and sometimes somebody just doesn’t see anything.

So be patient, be kind. It’s like working with insurance companies. If you’re nasty and you give people a hard time, guess where your file’s going? Bottom of the pile. We don’t want that to happen. We want these deals to move along as quickly as possible. So there’s so many moving parts to these acquisitions.

This is just really a little tidbit of banking information. If you ever have some questions, you’re not sure about something, maybe you’re already in the middle of a deal and something just doesn’t seem right. I’m always here to answer questions, always here to support chiropractic and chiropractors.

So feel free to give me a call any way that I can help. I’m always here to help you. That’s it for me today, Dr. Randi Ross, c e o of Premier Practice Consultants. Again, thank you to ChiroSecure for allowing me the opportunity to be a part of these classes and sharing a bit of information here with you today.