4) Low-Cost Commitment – One final item that few prospective chiropractic buyers understand is the fact that, in most cases, the loan process does not require any financial commitment until they have approved your loan. Most practice purchase loans go through several stages and at the start, the Buyer is typically not required to commit any money to the bank to acquire the loan (at least for the lenders that we work with). Prior to funding the loan and establishing a closing date for the practice purchase, a “good faith deposit” and/or downpayment will eventually be required. But that is further down the line. So “worst case scenario” if you are approved for a loan and you feel the timing is still bad due to the Coronavirus situation or marketplace conditions, you can decline or delay the loan by NOT making a good faith deposit or downpayment until you are ready to move forward. Eventually, the banks will close the loan application if you do not move forward. But what we’ve seen currently is that the banks are being flexible with this due to the obvious reason of uncertainty. Again, this good news for you as a prospective buyer.
One of the most common questions we get from prospective buyers in ANY season is whether this a good time to buy a chiropractic practice. Prospective chiropractic buyers pose this question in any and every marketplace during every economy because every buyer (and seller) wants to be able to “time the market” so that they can get the best deal possible on a chiropractic business.
Of course, currently the whole Coronavirus crisis is the “elephant in the room” in respect to all conversations about chiropractic practice sales. So I thought I would share a few things with you on the process of a practice purchase so that you would better understand the impact that has on a good, better or “best” time to buy a chiropractic practice.
While the time to buy a chiropractic practice is related to what’s going on in real estate, the finance industry and the current economy, most Buyers do not understand the steps or details involved in purchasing a chiropractic business enough to comprehend how they can (or cannot) impact the timing of the market.
If we dive a notch deeper, a better understanding of this process may reveal a potential “silver lining” in the COVID-19 cloud that’s hovering around us all. Here’s why:
1) Loan Rates are Low Now – if you choose to move forward towards a practice purchase, there is a significant advantage to processing a loan application now, in that the loan rates for practice acquisition purchases are the lowest ever in the history of acquiring bank financing for chiropractic practice sales! This is thanks, in part, to the recent decrease in the Federal Interest Rate. And when the bank makes a loan approval, you will be able to lock in that rate, for a period of time after the offer. Of course, we don’t know how long these low rates will last, but now they are excellent.
2. Banks Move Slowly Anyway – Some buyers are concerned about purchasing a practice “now” — amidst the Coronavirus crisis. However, the reality is that “now” really isn’t now, as in today, tomorrow, or even next week. Banks always move fairly slowly in approving a loan, so it’s not like you walk in one day and walk out with a check to purchase a practice the next. Furthermore, most business acquisition purchases go through the SBA lending process. The SBA doesn’t actually lend the money, but acts as “insurance” and another set of eyes for the bank that does. That means, the SBA involvement slows things down a bit more. And if the SBA is also making emergency loans for businesses impacted by Coronavirus, they may slow down even more than usual. So, it could easily take 6-8 weeks to get through the bank process before they make a loan decision. If on the odd chance, the bank processes your loan approval quickly and is ready to go, you can slow the banks down and choose a later closing date.
3) Potentially Perfect Market Timing – of course, no one knows how long the Coronavirus craziness will last, but likely it will peak soon and then wind its way down. What that means for a buyer is that you may be able to *time* this purchase to where the greatest risk of the business is right now and is being absorbed by the Seller. With that in mind, this may be a great time to buy a chiropractic practice because by the time you purchase, COVID-19 is gone and the business is picking back up. That exactly when you would land yourself in the driver’s seat, with a great loan rate and business that’s ready to rock. As with the stock market, it’s not easy to time the market to “buy low, sell high” but it may be possible to start the buying process amidst Coronavirus Concerns and finish when these probems are behind us.
If you are looking at the time to buy a chiropractic practice in your career, then my suggestion is that you continue to move forward and consider these positive options that are available to you now.
Certainly, I am not saying that Coronavirus will have no impact on a practice revenue but I am also not advocating that you should immediately drop the idea of a practice purchase if you are currently in the market to buy. Obviously, a level of concern over this whole ordeal is prudent, but I just wanted to share a little “inside scoop” with you on the purchase process since most of Buyers don’t understand what the process is really like.
It’s also my hope that you can understand how the current marketplace may create this to be a potentially good time to buy a chiropractic practice and how you may actually be able to use the process to your advantage as a prospective buyer.
If you are still looking to find a practice to purchase, then we’d be happy to help you in your search with our FREE PRACTICE MATCH.
Additionally, if you’d like more details on the process of financing a practice purchase, then consider our FREE WEBINAR – Chiropractic Practice Financing 101