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Selling Your Dental Practice? Let's Talk Debt Payoff

Before you get the ball rolling on retiring and selling your dental practice, there is something you must take into consideration. It may come as a surprise to some doctors that they need to pay their debt off before they sell their assets. It can be easy to forget about debt payoff during the transition process (your broker won’t!) but it must be addressed. Here are the steps you should take in regards to your debt, before/when selling your dental practice:

Debt Payoff Steps For Selling Your Dental Practice

  • First thing’s first: You need to pay off your debt. Be aware and prepared that practice debt will need to be paid off before or at closing. Many doctors will not want to pay off their debt beforehand. Rather, they want to use the proceeds of the sale to pay off debt. While that may be fine, your broker needs to know that in order to prepare for the transition. Not only does knowing this help your broker, but it makes it a more seamless transition process for you.
  • To get started preparing for your transition, figure out what debt you have and who it belongs to. Think about what assets you can sell, who your equipment loans belong to, and in general, the loans you have for which assets.
  • You can do a UCC search to look through financial records and find all the loans you owe in one place. You will want to make sure to do this well in advance of closing. This is something that your broker can help you do. They will follow up, find it for you and take additional steps to make sure that it’s paid off at closing. This involves things like contacting them, getting pay off letters and official letters with critical numbers.
  • When you contact the lenders to get payoff letters… You may have debt at a dental supply company or another company who is funding your loan. This debt can be paid off directly from the bank. In fact, your bank will send the check directly to the company you owe. The main premise is, when you need to sell, you must get rid of the loans.
  • Prepare by getting a financial advisor or broker involved. Having advisors around you will keep you focused and avoid any legal ramifications.
  • Remember to do a UCC search to see your loans, or look it up at the secretary of state. Once the debt is paid off, make sure to follow up with your lender and make sure they have filed a termination. Don’t forget this step - make sure to keep track of all aspects of your business, including debt payoff, and follow up.

When you go to sell your dental practice...

We just want you to be aware. In most cases, our clients already know about their debts and the need to have them resolved. If a selling doctor is well apprised of their debt situation, and has already made plans with their financial advisor, broker, or other trusted professional for resolving all outstanding debts, that can make for a much more efficient, easy transition. Don’t worry, having some debt is completely normal.

Overall, have plans to pay off your debt before or during the sale of your dental practice. Don’t get blindsided. Be sure to always be aware of your debt amount, what has been paid off, and prepare yourself for resolving it when you decide to transition. This will keep your stress down and keep the process from getting sidetracked. While every situation is different, we want to make sure we do everything we can to make the transition as smooth as possible for you. Let us know if you need any help.