The amount you have available for a down payment will affect what size practice you can afford to purchase. For SBA loans, down payments are typically 10 – 15% of your total loan amount. Your total loan would be comprised of the purchase price of the practice and whatever working capital you will need.
An example would be if you purchased a $200,000.00 practice and you received $50,000.00 in working capital, your total loan would be $250,000.00. Your down payment in this scenario would be $25,000.00 – $37,500.00. We also have loans available with NO DOWN PAYMENT. Call us at (480) 575-8095 so we can determine your best options.
Tips for Accumulating a Down Payment
- Save – Look for ways to reduce your monthly expenditures to save toward a down-payment. You could enroll for an automatic savings plan at your bank to have a portion of your payroll automatically transferred into savings. Some doctors save a couple of years for their down payment.
- Borrow the down payment from parents or family – This is definitely the quickest way to practice ownership. Probably 95% of our buyers borrow their down payment from their parents. Either a straight loan from the parents savings or an equity loan on the parent’s home. It’s quick and the payment very low because the repayment period is usually 30 years.
- Move – You may be able to save additional funds if you can move into less expensive housing.
- Reduce other higher interest rate debt – Paying off credit cards will initially reduce your savings, but the money you will save from higher interest rates will pay-off in the long run.
- Make a deal with the seller – In some circumstances, it is appropriate to ask the seller to carry a second-mortgage to cover your down payment. Typically, you will pay a slightly higher rate for this second mortgage.
- Sell some investments
- Get a second job and save your earnings
- Skip a year’s vacation
- Gift from Family – Parents and other family members are often anxious to help children buy their first practice and may have the means to give you a gift of money for a portion or all of your down payment.
Most of these ways of accumulating your downpayment take time. It is also very difficult to save the money necessary if you are living only on an associate’s salary. If your spouse works, it can be a more viable option to save the money. But as mentioned before, the quickest and most sure fire way to get into a practice fast is obviously borrowing from parents or in-laws. With the cash flow of your new practice, you’ll be able to pay them back in very little time.