Taking It To The Bank Part 2: The Loan Offer

FYI, Matsco no longer exists. They’re now called Wells Fargo Practice Financing.

I was offered a 10 year loan at either a 6.5% variable rate or 7.6% fixed rate. I chose to go with the latter. If you look up the historical graph of the federal prime rate, you will see that we currently have the lowest interest rates ever. Eventually, the Fed rate will rise, likely inflating the 6.5% variable rate into a monster over the life of the loan.

The nice thing about these healthcare financing companies is that they will give you longer terms with graduated repayment schedules. Of course, nothing’s for free. Interest will continue to accrue, and there may come a point where you will owe more than your original principal balance!

My repayment schedule was $100 for 3 months, interest only for 9 months, a graduated amount for 12 months, and then a final mature amount for the remaining 8 years. I’ve heard that Matsco is notorious for not providing amortization schedules for their borrowers. I did not receive one either. However, you can easily create your own using online loan calculators. I like Bankrate.com. It gets a little trickier when you have a grace period, pay interest only for the first few months, or have a graduated payment plan.

  • If you have zero payments for the first few months, your amortization schedule will be based on the accrued interest prior to the commencement of your monthly payments, plus your original loan amount.
  • If you’re paying interest only, you run your amortization schedule on the original loan amount only, once your monthly payments begin.
  • If you’re making graduated payments, you will be paying interest plus a small amount of principle. Subtract your monthly interest from your monthly payment, and reduce your original loan principle by this amount until your fixed monthly payments begin. Run your amortization schedule on this adjusted balance.

Be sure to keep strict records of how much of your payments go toward interest and principle each month using the amortization schedule you create. On your tax return, you will deduct the interest portion of your payments as an expense, and the principle through depreciation. Don’t worry about it if the bank eventually ends up issuing you an amortization schedule, and the numbers are a bit off from yours.  As long as you stay consistent with one schedule, and keep a copy of it, you shouldn’t get into trouble.  Usually the difference is like a few hundred dollars at most.

Supposedly, Matsco has no prepayment penalties for partial or full payment of the loan after 1 year, but I have read otherwise in discussion forums.

The easy requirements were to obtain property insurance, life insurance, disability insurance, and an office lease. They also required me to provide annual financial statements, a “milestone” worksheet, and a 30 minute phone consultation with a practice management specialist.

The toughest requirement to meet was to associate part-time making at least $600 a week. I understand why Matsco wants it’s borrowers to fulfill this requirement. As I have mentioned before, I expect to have abysmal patient volume in the beginning. Matsco wants to ensure that I will have some source of income to make my monthly payments during these times.

Matsco also wanted a perfected lien on the entire practice. This means that if I default, Matsco has first dibs on all the practice’s assets. All other lendors must wait for the scraps.

Finally, they asked for a $1,000 nonrefundable commitment deposit.

Excited just by the fact that I had funding, I signed immediately. I was definitely concerned about the associating income requirment, but was hopeful that I could land a part-time job somewhere.

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