I am thinking about taking over a practice and the senior dentist said he would owner carry. Do you guys think that this is a good way to go rather than getting a loan through the bank? What would be a fair average interest rate should I be looking at? I’m guessing 6%. I would appreciate any input. Thanks
There is a lot more risk to the Seller when there is an “owner carry back” and it is very atypical for a seller to carry the whole thing. Anything atypical is a red flag unless the owner can explain this with a reasonable answer. Typically when an owner will offer to “carry” it is because:
1. The practice is grossly overpriced.
2. There is something about the practice that dental lenders do not feel comfortable about.
3. The Seller has been trying to sell the practice forever and can’t find a buyer.
Jason, I’ll give the seller the benefit of the doubt? Maybe…
1. They really want to make it easy on the buyer by not having to jump through the third party lender process.
2. The seller wants to earn more on his money than the <1% they’re currently earning on their savings account.
3. The owner doesn’t want to pay the large commission on an annuity and wants to create their own, or
4. Maybe the seller wants to spread the tax bite out over many, many years.