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Financing a Surgery Center Buy-In

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  • Financing a Surgery Center Buy-In

    We have an opportunity to buy into a surgery center, but paying for the investment outright would drain most of our savings. Does anyone have experience taking out a loan to buy-in? What advice do you have, specifically about financing the investment or more generally about buying into a surgery center? Do lenders offer loan products specifically for this purpose, or would we be taking out a personal loan? We don't have any student loans, and our only debt currently is a mortgage, so I'm hesitant to take out a loan and being in debt again.

  • #2
    It would likely be a business loan and can have tax deductible interest. There are definitely ways to do it since its a very known thing.

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    • #3
      @Zaphod Do community banks typically offer loans for this sort of thing, or would we need to start researching physician-specific lenders?

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      • #4
        My experience is that local banks are glad to finance buy-ins because they are reasonably low-risk loans for them. The business is established, the debt to income ratio is good, and the lendee is local. This is a business loan so make sure to speak to the commercial loan officer. If the practice has an existing line of credit with a particular bank, you may even get a small discount for using them as well-this happened for 2 of my wife's partners when they financed their buy-in. As always, it's important to do due diligence about the profitability and rate of return of the surgery center before you commit to the buy-in.

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        • #5




          My experience is that local banks are glad to finance buy-ins because they are reasonably low-risk loans for them. The business is established, the debt to income ratio is good, and the lendee is local. This is a business loan so make sure to speak to the commercial loan officer. If the practice has an existing line of credit with a particular bank, you may even get a small discount for using them as well-this happened for 2 of my wife’s partners when they financed their buy-in. As always, it’s important to do due diligence about the profitability and rate of return of the surgery center before you commit to the buy-in.
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          In addition to the above advice your local CPA may know who people are and there are lots of SBA type lenders on line to at least get an idea of things. Also, I have no personal experience doing the above, just looking into it prior, there are many on here that do and expect you will get some great advice soon.

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          • #6
            Yes I have done this several times.  Now I would just pay cash but the first 2-3 buy-ins I used significant debt financing.  I went to personal bankers at traditional banks and they were more than willing to loan me the money.  It works best if you set up the loan payments to be close to the timing of the dividend payments (e.g. quarterly etc.).  You need to look a the financial statements to make sure it is a good investment, but if so you shouldn't have difficulty getting the funding.  Then plan to use the dividends to pay off the loan.  Once the loan is gone the cash flow is free. The last paragraph of this blog post may be helpful: http://wealthydoc.com/blog/the-fundamental-equation-of-accounting

             

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            • #7
              anyone have any recommendations on banks in FL for this exact type of buy-in?

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              • #8




                anyone have any recommendations on banks in FL for this exact type of buy-in?
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                The surgery center may be able to recommend someone. We worked with Jason Stone at Physicians Capital, which is a part of Evolve Bank & Trust. [email protected]

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                • #9







                  anyone have any recommendations on banks in FL for this exact type of buy-in?
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                  The surgery center may be able to recommend someone. We worked with Jason Stone at Physicians Capital, which is a part of Evolve Bank & Trust. [email protected]
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                  What was your experience with Jason Stone? I am considering using them. Thanks

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                  • #10
                    I’m personally having a really hard time getting financing. Big name banks won’t do it and the smaller banks need enough collateral to offset the loan amount. Given my student loan burden, I just don’t have enough equity despite the investment being solid. Any recommendations would be much appreciated.

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                    • #11
                      My partnership buyin is split 50/50 with the business and the local bank that has bee working with the group for 30 years. This works especially if the buyin is closer to 7 figures or more.

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                      • #12


                        What was your experience with Jason Stone? I am considering using them. Thanks
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                        We had a fantastic experience with Jason. We considered both Physicians Capital and another lender that works in healthcare financing, and ended up going with Jason because of his knowledge and responsiveness. We got the recommendation for both lenders through the surgery center.

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                        • #13




                          I’m personally having a really hard time getting financing. Big name banks won’t do it and the smaller banks need enough collateral to offset the loan amount. Given my student loan burden, I just don’t have enough equity despite the investment being solid. Any recommendations would be much appreciated.
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                          Is there anyone the surgery center recommends? They've most likely gone through this before, so they should have some ideas.

                          The lender I mentioned above specializes in this stuff. I'm sure there are many others out there that do, too.

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                          • #14
                            That’s great! He does seem very knowledgeable the times we have spoken. The only thing that makes me a little hesitant is the variable prime rate since rates are on the rise the next few years. Rates last year even were much better than the current rate.

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                            • #15




                              That’s great! He does seem very knowledgeable the times we have spoken. The only thing that makes me a little hesitant is the variable prime rate since rates are on the rise the next few years. Rates last year even were much better than the current rate.
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                              Our loan also has a variable prime rate, and I have the same concerns. It's certainly not ideal. We're just trying to get it paid off as quickly as possible, throwing 100% of the dividends at it + additional money each month. That puts us well above the minimum payments, and we should be able to pay it off much faster than the 5-year timeline.

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