How Long Does It Take to Finance an Internal Medicine Practice Acquisition?
Financing an internal medicine practice acquisition can take time, and the exact timeline can vary depending on the lender, financing program, complexity of the transaction, documentation, and the financial condition of the practice and borrower.
Physicians planning to purchase an existing practice should understand the potential financing timeline before setting a closing date. Starting the process early can provide additional time to gather documents, review financing options, and address issues that may arise during underwriting.
For physicians considering internal medicine practice financing, understanding the steps involved can help make the acquisition process more predictable.
Here are five important factors that can affect how long financing an internal medicine practice acquisition may take.
1. The Type of Financing Can Affect the Timeline
Different financing programs can have different application, underwriting, documentation, and closing requirements.
An acquisition may potentially be financed through an SBA loan, conventional financing, or another financing structure depending on the borrower and transaction.
SBA financing can involve additional documentation and review requirements, while conventional financing may have different underwriting criteria.
Because every transaction is different, physicians should discuss the expected timeline with their financing professional as early as possible.
2. Having Financial Documents Ready Can Help
One of the factors that can affect the financing timeline is how quickly the borrower can provide requested documentation.
Physicians may be asked to provide:
- Personal financial statements
- Personal tax returns
- Business tax returns
- Practice profit and loss statements
- Balance sheets
- Bank statements
- Accounts receivable information
- Existing debt information
- Purchase agreement or letter of intent
- Business projections when applicable
Having these documents organized before the financing process begins can help reduce delays caused by missing information.
3. The Complexity of the Acquisition Can Impact Timing
A straightforward acquisition of an established internal medicine practice may have a different timeline than a more complicated transaction.
Additional factors can include:
- Purchasing commercial real estate
- Financing medical equipment
- Multiple business locations
- Complex ownership structures
- Large financing requests
- Significant renovations
- Multiple financing needs
When multiple components are involved in a transaction, additional review and documentation may be required.
4. The Practice’s Financial Records May Need to Be Reviewed
Lenders generally need to understand the financial condition of the practice before approving acquisition financing.
Financial information may include historical revenue, expenses, profitability, cash flow, accounts receivable, and existing debt.
If financial records are incomplete or additional information is required, the underwriting process may take longer.
Physicians can help prepare for this part of the process by working with the seller to obtain the necessary financial information as early as possible.
5. The Purchase Agreement and Closing Process Matter
The financing timeline is also connected to the overall acquisition timeline.
A purchase agreement or letter of intent can provide important information about the transaction, including the purchase price, assets being acquired, seller information, and other relevant terms.
Changes to the transaction during the financing process can require additional review and potentially affect the expected closing date.
Physicians should coordinate the financing process with their attorney, accountant, seller, and other professionals involved in the transaction.
What Can Delay Internal Medicine Practice Financing?
Several issues can potentially slow down the financing process.
These may include:
- Missing financial documentation
- Incomplete tax returns
- Unclear purchase terms
- Changes to the purchase agreement
- Questions regarding practice cash flow
- Outstanding debt or liabilities
- Real estate appraisal requirements
- Equipment valuation requirements
- Additional underwriting questions
Being prepared and responding quickly to requests for additional information can help keep the process moving.
When Should a Physician Start the Financing Process?
Physicians should generally begin discussing financing well before the anticipated closing date.
Waiting until the last minute can create unnecessary pressure, particularly if the transaction requires significant documentation or includes real estate, equipment, or other components.
Starting early allows time to evaluate financing options, review the practice’s financial information, prepare documentation, and identify potential issues.
Can Financing Be Started Before a Practice Is Under Contract?
In some situations, physicians can begin discussing financing before a final purchase agreement has been completed.
Early conversations can help a physician understand potential financing options and determine what financial information may be needed.
A lender or financing professional may also be able to identify information that should be addressed before the transaction moves further along.
The exact process will depend on the lender, financing program, and stage of the acquisition.
How Can Physicians Make the Financing Process More Efficient?
Physicians can take several steps to prepare for an acquisition financing request.
These may include:
- Gathering personal financial documents
- Reviewing credit history
- Obtaining the practice’s financial statements
- Organizing tax returns
- Understanding the proposed purchase price
- Determining working capital needs
- Identifying equipment or real estate that may be included
- Preparing a clear description of the transaction
The more prepared the borrower and seller are, the easier it may be to address lender questions during the financing process.
Final Thought
The time required to finance an internal medicine practice acquisition can vary based on the financing program, lender, borrower qualifications, practice financials, transaction structure, documentation, and other factors.
Physicians should avoid assuming that every acquisition will follow the same timeline. Beginning the financing process early and preparing financial documents in advance can help reduce unnecessary delays.
Whether you’re purchasing your first internal medicine practice or expanding an existing medical business, planning the financing process early can help you work toward a smoother acquisition and closing.
