SBA Waives loan fees

By Dr. Alissa Wald and Scott Daniels
If you are looking to buy a practice there is no better time than now. With interest rates at their lowest and the recent waiver of SBA loan fees it might be time to consider that practice you’ve always wanted. On February 17th, President Obama signed into law the American Recovery and Reinvestment Act of 2009 which reduces or eliminates certain fees on 7(a) and 504 loans. For a limited time you’ll save up to 2% of your loan amount in waived fees. While these fees are generally added to the loan amount you’ll still save a lot. On a $500,000 practice loan you’ll save up to $10,000 or more. There are two types of loans. 7(a) loans are the most common and generally are variable rates. Loans can be used for real estate purchases, construction, practice purchases, refinancing existing debt, working capital expansion or new equipment. The government has also increased their guaranty of these loans to from 75% to 90%. 504 Loans are generally used for real estate and construction loans and include a first and second mortgage. The first mortgage is 50% and the second provided by the government is 40%. Ten percent either comes from a seller note or buyer down payment.
504 loans are advantageous because they offer fixed rates terms of 25 years and 20 years on each mortgage when you buy real estate. With rates running around 6% it could be a great time to buy real estate. Only certain lenders handle 504 loans and they tend to be a little more complicated because you are dealing with two banks. (The primary lender and the CDC bank, which stands for Community development center which provide the government guaranteed loan for the 40% second mortgage.
7(a) loans are more common and typically are variable with terms of 10 years for practice purchases and 25 years for real estate purchases. Most lenders will require 10% down either in the form of a seller’s note or buyer’s down payment. Some lenders such as Vision One Credit Union offer special SBA blended programs that require no down payment.
Of course conventional loans are still readily available with terms from 10 to 15 years for the practice purchase and 25 years for real estate. Conventional real estate loans often require as much as 25% down from the buyer making them out of reach for many people. Whether you decide on an SBA or conventional loan you should plan ahead and leave plenty of time to complete the banks requirements list. Lists often include such things as term life insurance, current tax returns for yourself and the seller. Since these items (especially life insurance) take time to complete –It is imperative that you plan ahead. Many buyers get life insurance prior to finding an office. So in your quest to buy your dream office it’s nice to know that rates are low and lenders are still readily offering loans (at least to doctors).

Practice Concepts works with several lendrs to assist buyer in obtaining the the best financing possible. We offer both conventional and SBA typle loans. Contact us if yo uhave questions about getting a loan to buy your practice.