By J.P. Blevins
When you apply for financing for a dental practice purchase, startup, or construction project, you are engaging not only your lender but a whole group of specialists who bring the loan to fruition. Understanding the roles of the players who create and deliver the loan package can help you gather the appropriate information and more easily navigate the financing process.
So who are the players in the loan process?
Many borrowers tend to believe their lender is responsible for approving their loan application. The true role of the bank lender is to provide the interface between you and the financial institution by collecting the information necessary to prequalify you for funding and ultimately gaining loan approval from others in the bank.
The lender ensures that the borrower represents a reasonable financial risk for the institution, and the financial institution is able to offer a favorable financing package. Once all the necessary information is collected from the borrower, the lender packages the loan request for others in the institution to review for loan approval or denial.
The underwriter is perhaps the most influential person in the loan process. He or she researches and prepares your financial "story" and presents it with the loan package to the credit officer. The underwriter develops a detailed credit memo summarizing the background of the borrower and specifics of the loan package, and then presents the credit memo to the credit officer who approves or rejects the loan request.
Key responsibilities of the underwriter include verifying that all information provided by the borrower is accurate and assessing the eligibility of the borrower to receive the institution's loan products. A detailed credit analysis precedes the granting of a loan package and is based on credit information furnished by the borrower. If you are applying for practice acquisition, expansion or upgrade financing, the credit analysis may require a business financial balance sheet showing liquidity and cash flow.
Chief Credit Officer
The chief credit officer holds a senior management level position, often working in conjunction with the bank's board of directors and senior officers to ensure the quality of the bank's lending portfolio. The chief credit officer has the final say on whether or not to lend, providing ultimate approval or disapproval of each loan application that comes through the bank's door.
An experienced CCO can review and approve or reject a loan application in about 48 hours. The chief credit officer may also create policies and guidelines for granting credit to the institution's customers, as well as strategies for managing the bank's lending portfolio to ensure it continues to meet the organization's goals.
Once a commitment is made by the institution to provide financing, the closer assembles, verifies, and prepares closing documents in order to complete the loan transaction. The closer arrives at detailed and accurate financial numbers, prepares the required paperwork for the borrower to sign, and walks the borrower through documentation to make sure everything is understood and the deal is successfully completed or closed. The closer also ensures proper funding of the loan.
As the borrower, your role is to make sure there are no holes in your financial story. The more complete your application package is, the easier you will make the process for the bank, and for you. Furthermore, a clean, well-organized and complete package can leave a positive impression that may serve you well in the future when seeking additional funding.
If you are requesting funding for a startup dental practice, be sure to include a thorough business plan. For a practice acquisition, expansion or construction loan, or refinancing package, lenders typically require only your business financials.
When applying for a practice loan, consider choosing a specialty lender that is familiar with the dental industry. A specialty practice lender can make the loan process more efficient for you since the lender already understands your business and the specific funding needs of the dental practice.
J.P. Blevins joined the Live Oak Bank team in early 2011, and initially spent much of his time educating young professionals about financing and how to best maintain and grow their businesses. Now he serves as a loan officer and general manager working exclusively with the health-care community. Reach him via email at email@example.com.
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