“It’s always important to select a qualified advisor to serve you.”
— Mark Eric Bailey
Last year a prominent dentist contacted us regarding an impending trustee sale. He owned a very high performing dental practice which was virtually debt-free in a highly visible AAA location. He and his wife owned a beautiful home, strong investments and both had excellent credit.
In 2011, he had acquired a second dental practice across town in hopes of replicating his success. He cross-collateralized everything he owned to purchase the building and the practice; both he and his wife guaranteed the loan.
Unlike his primary practice, the second practice was located on a side street behind a convenience store and bar. Next to it was a driveway back to a shipping and distribution center with a fenced lot full of trucks. Thereafter the street suddenly became residential. The practice had zero visibility, limited drive by traffic. Though his objective had been to replicate the practice success he had achieved with his primary practice, this practice simply became a thorn in his side and never earned a positive income. The shortfall was paid by his primary practice.
Year after year the negative cash flow increased. He realized the building was worth less than he had invested; the practice was worthless. There were few active patients; the equipment was very old. He was stuck. He contacted a dental consultant known for success with short sales.
Without knowing the dentist’s financials, net worth or creditworthiness, the consultant recommended that he stop making his loan payments in hopes of the lender renegotiating the terms with him. He accepted the recommendation and in so doing risked his primary practice, their home, their investments, and their creditworthiness. He was stunned after 90 days to receive notice of the trustee sale.
The dentist called us. We analyzed all of his practice financials, net worth, creditworthiness, his life. We informed him that the path he was on could cost him his primary practice, his home, his investments and would definitely destroy both he and his wife’s creditworthiness. He was not a bankruptcy candidate. We created a recovery plan.
We discovered his REALTOR friend had a purchaser for his second practice’s building at a reduced price. We met with the lender and requested a 45 day extension on the trustee sale. We provided the lender with a copy of the fully-executed real estate agreement and proof of escrow deposit. We then presented his dilemma to a local community bank and asked if they would finance the shortfall secured by his primary practice and with a certificate of deposit at their bank. Though the community bank’s underwriting was slow and tedious, we were able to close on the building and the new loan simultaneously, averting disaster. The dentist and his wife were thrilled. The SBA lender was thrilled as they did not lose one penny. The dentist and his wife’s finances and creditworthiness were not negatively impacted; the husband’s ability to focus 100% of his time and energies on his primary practice quickly enabled him to pay off the new debt in its entirety.
Lesson Learned: “It’s always important to select a qualified advisor to serve you.”
Dental Recovery Solutions 360, LLC – We save dental practices.