The question “Is it possible to buy a chiropractic practice with student loans?” is one that we get asked often by chiropractors considering a career move to purchase a chiropractic business or leave an associate job.

It’s a good one.

After all, if there is no way to buy a chiropractic practice with student loan debt — then the DC has eliminated one possible career path and they will likely either be forced to stay in an undesirable associate job or go down the risky road of starting a practice from scratch.

The surprising answer is this:

While it’s no secret that many chiropractors enter the profession a significant amount of student debt, your chiropractic student loans will not stop you from buying a practice.  Yes, you read that right — the number of zeroes after your student loans do not scare off bankers and lenders who are familiar with chiropractic practice acquisitions. Here’s why:

BANKS VIEW DEBT DIFFERENTLY

Probably the biggest reason that it IS possible to buy a chiropractic practice with student loans is the simple fact that banks view debt differently than you or I do.

For example, if a friend were to ask you to borrow $10 to get a bite to eat, you’d probably wouldn’t give too much hesitation to loaning them the money for this good purpose.  But if a friend asked you to lend them $10,000 for a good purpose, most people would put some serious thought into that request.  And likely, it’s going to depend on the level of your friendship, the trustworthiness of the friend, the circumstances surrounding the need, the repayment terms and perhaps a whole bunch of other conditions that would make you say either “yes” or “no” to the request.

Banks, on the other hand, are in business to make money by loaning money and then investing their money to make more money.  Banks understand that ALL loans are a risk that they are exchanging for the hope of a greater reward or investment.

Here’s where the bank thinks differently.

Banks would view loaning the friend $10 as a risk, just as loaning $10,000 is a risk.  But the loan of $10,000 comes with a greater reward because of the interest the bank will earn on that loan (as compared to the $10 loan) AND because of the leverage that they can use to invest the larger sum to get even greater returns on their investment.

Your student loans then, do represent a risk.  But to a bank, all lending involves a risk.  The key to their decision making is not in the fact that there is some risk, but in the promise of some reward.  Sure, the risks may be lower if you have less debt.  But banks are not in a place that they only lend to people who have no debt.  If that were the case, then few people would ever qualify for a mortgage.  Instead, the banks position is weighing the risk of lending (including the risk to people with debt) versus the reward of the loan.  If the reward is seen as attractive, then the loan will be approved.

This is not to say that banks ignore debt or that there are levels or types of debt that banks feel are unattractive. If you are looking to borrow money to buy a chiropractic practice, you need to understand that a critical piece of the approval process is that a lender is going to look at all debt — student loan, car loan, home loan, etc – in respect to cash flow. The lender will then add up all the payments needed to fulfill your monthly debt obligations and then they will determine if the chiropractor can afford to make the payments back to the lender.

So, in other words, your student loans are only one piece of the puzzle.  More importantly, the amount of OTHER debt that you have (and your history of timely payments) will factor into the equation as much or even more so than your student loans.

SOME BANKS UNDERSTAND HEALTHCARE PROFESSIONS

The second reason that banks can help make it possible to buy a chiropractic practice with student loans is that SOME banks understand the attractiveness of healthcare loans.

There are two keys to appreciate here:

First, some (but not all) banks understand that healthcare loans are a good risk.  They understand that while you may come with larger debt than other borrowers, as a doctor, you also have bigger income potential.

Second, any lender that specializes in healthcare loans understands the fact that most chiropractors – just like most dentists, medical doctors and other health professionals – will have student loan debt.

In general, this one phrase (‘that specializes in healthcare loans) will separate the majority of the banks that will approve your loan from the ones who ultimately reject it.  After all, your financial profile is the same. The price and profile of the business you are purchasing is the same.  The big difference is the bank’s understanding of the chiropractic marketplace.

What you will find is that banks who do not specialize in chiropractic practice acquisition loans will generally require MORE money as a downpayment from you, MORE seller financing from the owner, approve smaller loan amounts and ultimately, make fewer loans to chiropractors in general.

Possible Red Flags Do Exist

While these facts do help make it possible to buy a chiropractic practice with student loans and historically, they make the present marketplace an attractive time to buy, we have not entered into a period of mass “speculative” lending with an abundance of subprime loan offerings like we saw in real estate just prior to the economic recession back in the early 2000’s.

Past financial indiscretions can hurt a buyer’s chances act getting a loan. Specifically, chiropractors will find the biggest challenges to getting approved if they have a poor track record of repaying their debts.

Yes, that means short sales or foreclosures can hurt your financing efforts. And past bankruptcies will severely limit the number of lenders, if any, who are willing to work with you (particularly if your bankruptcy is less than seven years old).

Even your present financial situation can make things difficult if a lender sees multiple late payments or high credit card debts.

FINAL STEPS TO YOUR FUTURE

When you make the decision to purchase a practice, you’ll need to be aware that financing a practice is a little different than getting a mortgage to buy a house, so be prepared for a different sequence of events and allow plenty of time for the process.

Most banks can give you a conditional “pre-approval” on a loan within a couple of weeks and then it takes several more (typically 4-6 weeks) for the underwriting and funding process to be complete.

In other words, don’t quit your associate job just yet because you found the practice you want to buy, as it will take a month or more for the sale to finalize – and being unemployed with no income can easily jeopardize your lending situation.

In the meantime, if you are considering a practice purchase, the “timing” is right in terms of financing opportunities – now it’s up to you to move forward and take advantage of the fact that it is possible to buy a chiropractic practice with student loans!

Need to Learn More about Buying a Chiropractic Practice (& Loan Options)? Consider our FREE ON-DEMAND webinars and videos designed to help you learn more about buying or financing a chiropractic practice.

Need to FIND a Practice to Buy (Or an Associate Job or Ownership Opportunity)?  Our FREE Practice Match service will help you do exactly that! Just fill out the form, tell us your interests and let us find you a great fit!