Begin with a single list of every loan, line of credit and equipment lease the practice carries, showing the rate, payment, maturity, prepayment terms, covenants, collateral and guarantees for each. That list shows which debt costs the most and which terms can move. From there you can time a refinance, put together a lender package and ask for specific changes.
Most owners know their monthly payments well. The documents behind them are another matter, especially when leases were signed one at a time and the line of credit renewed without anyone rereading it. Lenders respond well to an owner who arrives organized, with a clear request.
This is general operational guidance, not legal, tax or investment advice. Please involve your CPA and attorney in any decision to refinance, consolidate or sign new loan documents.
What debt does the practice actually carry?
Gather every statement and signed agreement, and ask your CPA for the debt schedule from your last return. Something forgotten usually turns up, often an old lease.
| Item | What to record |
|---|---|
| Lender and loan type | Acquisition, buildout, real estate, SBA, line of credit, equipment loan or lease, vendor financing |
| Balance | Current and original amounts, from the latest statement |
| Rate | Fixed or variable; for variable, the index, margin and reset dates |
| Payment | Monthly amount and the split between principal and interest |
| Maturity and balloon | End date, and whether a large final payment is due |
| Prepayment terms | Any fee for paying early, and when it expires |
| Covenants | Financial tests and reporting deadlines in the agreement |
| Collateral | What the lender has a lien on, including any blanket lien |
| Guarantees | Who signed personally, including a spouse |
| Key dates | Line renewals and lease notice windows |
Sorting by interest rate shows where the money goes. Sorting by the next date on each item shows your deadlines.
Which loan terms matter most?
Rate type. A variable rate follows its index, so it helps to know the reset dates and what the payment would be after an increase. Some loans also have a floor the rate can't drop below.
Maturity and balloon payments. A comfortable payment can hide a large balance due in a few years. When a balloon is coming, its date drives the rest of the plan.
Prepayment penalties. Many loans charge a fee for paying principal early or refinancing. With SBA 7(a) loans of 15 years or longer, prepaying more than 25 percent of the balance in the first three years costs 5 percent of the prepaid amount in year one, 3 percent in year two and 1 percent in year three (13 CFR 120.223). Conventional bank loans set their own terms.
Covenants. A loan may require a minimum cash-flow ratio, limit new borrowing or set a deadline for annual financials. A missed reporting deadline can count as a technical default even when every payment has been on time.
Personal guarantees. Note whether yours is capped or unlimited, and whether your spouse also signed.
Collateral and cross-default. A blanket lien on practice assets can make borrowing elsewhere difficult. With a cross-default clause, trouble on one loan can put another loan with the same lender in default.
Equipment leases. Each lease ends with either a nominal buyout or a fair market value purchase. Many renew automatically if the notice window passes.
When does refinancing or consolidating make sense?
A refinance is worth doing when the new loan costs less over its life, after origination fees, closing costs, legal fees and any prepayment penalty on the old loan. A lower payment on its own can be misleading; stretching a five-year equipment loan to ten years usually adds interest.
Timing often matters as much as rate. Waiting for a prepayment fee to step down can save real money, and starting well ahead of a balloon or line renewal keeps you from negotiating against the clock. Lenders underwrite from tax returns and current statements, so a strong recent year helps. If an associate or a sale is on the horizon, structure the debt with that in mind.
Consolidation can simplify payments and sometimes releases collateral. It can also roll short-term debt into a long loan or add a guarantee, so the new terms deserve the same careful read as the old ones.
What goes into a lender package?
Your lender will have its own list, and it will probably look close to this one.
- Business tax returns for recent years, and personal returns for each guarantor
- Year-to-date profit and loss statement and balance sheet
- The debt table above, current as of this month
- Production and collections reports, and an AR aging summary
- A personal financial statement for each guarantor
- A short note explaining any dip in revenue or profit and what has changed since
- A simple projection of the new payment against expected cash flow
- Your request, in writing, on one page
The note about a dip carries real weight. "Collections fell after our office manager left; here's the AR routine we put in place and the three months since" gives the lender a risk it can understand.
What can you ask a lender for?
A specific request gets a specific answer. Depending on the situation, you might ask for:
- A lower rate, or a switch from variable to fixed
- Re-amortizing the balance to lower the payment, with total cost shown both ways
- A short interest-only period during a known disruption
- A waiver or reset of a covenant that's been missed or soon will be
- A reduced or waived prepayment fee when refinancing with the same lender
- A line of credit renewal or increase, agreed ahead of time
- Release of a lien on specific assets, or of a spouse's guarantee
- Consolidating several loans with that lender into one
These questions tend to open useful conversations.
- "What would it take to reduce or release the personal guarantee?"
- "Which covenants are you watching most closely, and where do we stand?"
- "If we prepay part of the balance, what fees apply and when do they change?"
- "What do you need from us to approve this by [date]?"
Get any agreed change in writing, and have your attorney review it before signing.
What if a payment is already late, or about to be?
Calling before the due date usually leaves more options open, since lenders can do more before a default than after one. If a forbearance or modification agreement is offered, have your attorney read it first, as these often add new waivers and terms.
A few well-prepared conversations with a lender can change a practice's year. Molar + Margin reviews loans, lines and leases line by line, negotiates with lenders on your behalf and builds a plan to bring the debt down, either as a fixed-fee Lender and Debt Review or within a monthly retainer. We'd be glad to start with a complimentary 30-minute First Look. We're based in South Florida, work with practices remotely across the U.S., and can be reached at jana@molarandmargin.com or 561-685-4859.