SBA Financing Myths Article

PRACTICE ACQUISITION FINANCING OPT= IONS:

THE SBA MYTH AND FACTS ABOUT PRACT= ICE FINANCING

In an effort to provide the best financing options available in the market place, Coffman Capital Inc. would like to explain h= ow we can use both conventional and SBA guaranteed lending for the optimal ble= nd of practice acquisition financing advantages. Many healthcare consultants are aw= are of our conventional loan capabilities for doctors, so we would like to share w= ith you the SBA lending side as well. Coffman Capital uses SBA programs t= o help many different types of doctors acquire practices to supplement conventional funding, and we would like to point out some misconceptions about the progr= am that many still have:

“IT TAKES TOO LONG”

First to dispel the fear that the approval process i= s long and uncertain: Using the Pref= erred Loan Program (PLP), Coffman Capital’s SBA loans normally are credit approved in 2 or 3 business days from when we receive the complete file fro= m the borrower/seller/broker. This = does NOT include a mass of SBA paperwork, the infamous “cookbook application” most banks require when one first applies for an SBA loa= n. For credit approval we use the SBA= Personal Financial Statement which is simpler than most lenders’ forms, and a Statement of Personal History which is basic and not time consuming. The remainder of the application p= ackage is user-friendly, some of which may be done by phone or online, and does not require a CPA’s assistance or a complex business plan. The information needed from the se= ller is no different than any conventional loan program, including past years= 217; tax returns and interim financial statements.

Once credit approval is obtained, Coffman Capital is= sues a bona fide loan proposal with the actual figures that have been = approved regarding closing costs, working capital, amount of cash needed if any (MD’s, Dentists and Veterinarians qualify for zero down payment), etc= . Because we use the PLP whenever pos= sible, the SBA’s credit approval is= not required, and our final approval rate once proposals are issued is virtuall= y 100%. After the borrower accept= s the proposal by signing an agreement with Coffman Capital to do business with u= s, and pays the lender’s packaging fee (only $750-$1000 in most cases vs. $1500 charged by most banks), the loan can then be submitted for PLP lender’s in-house approval which generally takes 1 to 2 weeks during which time the borrower is furnished a closing checklist and counseled on h= ow to expedite the closing process, including securing required insurance policies, lease requirements, etc.<= span style=3D'font-size:8.0pt'>

How fast can the loan close? This is almost always a factor of = how cooperative the seller is and how well the buyer follows instructions. If the borrower pursues the proper insurance coverage early in the process and/or allows us to help expedite t= hose processes, and if the contracts and leases are negotiated in a timely fashi= on, a loan not involving real estate can close in 6 weeks from the day it was originally submitted with complete financial information. Transactions with buildings may ta= ke longer due to third party services such as appraisals, surveys, environment= al reports etc. Of course, occas= ional delays due to processing bottlenecks and other issues that affect any busin= ess may occur, just as they do with conventional practice acquisition loan programs= .

“NOBODY HAS THE CASH DOWN PAYMENT”= ;

MD’s, Dentists and Veterinarians no = longer are required to make a cash equity injection for practice acquisitions hand= led through Coffman Capital. = Real estate can also be acquired with zero down with the seller holding a 10% no= te or just finding another source to lend that 10%, which is permitted, along = with gift funds. For those transactions that do require a down payment, such as =

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Chiropracto= rs, Podiatrists and Optometrists, Coffman Capital almost never requires more than 10% equity injection from a doctor for an SBA loan, and all doctors are eligible for the zero= down payment for real estate. Finally, the working capital included in the loan usually is larger = than the cash injection itself, resulti= ng in 100%+ financing.

When a cash equity injection is requir= ed, from what sources may the cash be raised? Cash may come from savings, a home equity loan (doctors only, in approved cases), temporary withdrawal from retirement funds (replaced with working capital in the loan), and gift funds from a family member as long a= s it is verifiable. If the doctor has b= een working in the practice being acquired, the seller may pay part of the down payment as an earned bonus – case by case. Coffman Capital has funded mil= lions in practice acquisitions to young (2 year license minimum) doctors who mana= ged to raise the cash within SBA’s guidelines, so it is possible!

“THE TERMS ARE TOO CONSTRICTIVE”<= /p>

This is not= true. Practice-only (no real estate) ter= ms are always at least 10 years with Coffman Capital for the lowest payment (most banks only go 5-7 years), and = the most generous underwriting of any loan program applies, so it is actually easier to get loans approved. Also, loans under 15 years hav= e no prepayment penalty. Spouses are not required to guarantee unless they own 20% of the practice, and = sellers are normally not asked to hold= a note if cash flow sufficiently covers the debt and personal expenses. There is also no maximum ratio of loan to gross revenue to penalize a practice with low overhead when applying for financing. Finally, Coffman Capital’s S= BA loans do not require disability insurance in most cases.

Regarding collateral, there is no minimum amount of assets – most of the loans are under-collateralized. However= , in the occasions that the borrower has excess equity in their home or non-qualified investments, SBA may require them to be pledged, but the great majority of borrowers do not pledge their home or other assets because they usually do not have “excess” assets when buying a practice.

“WHY DON’T OTHER PRACTICE LENDERS STRESS SBA LOANS?”

Basically they make more money using = other programs. Also, most do n= ot have the expertise that Coffman Capital has developed over the years. Coffman Capital is one of the only lenders to aggressively offer SBA loans on an equal footing with convention= al loans, even though it makes us less money.= Most SBA lenders won’t even pursue a 10 year SBA practice loan because they make most of their money on larger, long term real estate loans. But Coffman Capital does. Quite simply, an SBA PLP practice acquisition loan is in many cases = the best program for the business borrower, and Coffman Capital is your best op= tion to acquire financing under this program.

Please feel free to call us = 813-891-1811 ext. 103 or toll free at 877-661-8069 to discuss these and other funding cap= abilities or regarding any specific needs. You may also visit our website at = www.Coffman= Capital.com, where you can also download all of our forms and checklists. We look forward to serving you!

Matthew Parker

Vice President-Commercial Finance

parker@coffmancapital.com