374: Tips to Apply Successfully for SBA Loans

Joshua Kim, owner, founder, and CEO of 7(a) Accelerator, joins the podcast to make sense of small business loans, and BOY is there a lot to it! This episode is jam-packed with quick tips and tricks to navigate the process and services available, how to best navigate medical billing, and standard operating procedures for the loans themselves. 

*** Fresh out of grad school or a new doctor? Josh has specific information for you! ***

There’s no secret sauce to apply for these loans, but it does help to have a cook in the kitchen when you’re trying to figure it out. Josh’s advice will help you get started.

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Podcast Transcript:

Kiera Dent:

Hey, everyone. Welcome to the Dental A Team podcast. I'm your host, Kiera Dent. And I had this crazy idea that maybe I could combine a doctor and a team member's perspective because let's face it, dentistry can be a challenging profession with those two perspectives. I've been a dental assistant, treatment coordinator, scheduler, filler, office manager, regional manager, practice owner. And I have a team of traveling consultants where we have traveled to over 165 different offices, coaching teams. Yeah. We don't just understand you, we are you. Our mission is to positively impact the world of dental. And I believe that this podcast is the greatest way I can help elevate teams, grow VIP experiences, reduce stress and create A teams. Welcome to the Dental A Team podcast.

            Hello, Dental A Team listeners. This is Kiera and you guys, I love guests like the guest I've got for you guys today. They do something completely different than I do. And it's a great way for you guys to grow your businesses and to just go from a different avenue. I actually have Joshua Kim, he came to me through Paul Goodman. We all know Paul Goodman, love him. Joshua Kim, he is the owner and founder CEO of 7a Accelerator. He does a lot with SBA loans, M&A, raising capital, all the things that I have no clue about. I'm so excited to be educated and learn from him. Super nice guy, so excited. Josh, how are you today?

Joshua Kim:

Great. Thanks for having me on. I'm glad we got a chance to schedule this.

Kiera Dent:

Yes, of course. And you guys, he's already the nicest guy because I have an appointment right after our podcast. I'm car casting and he's nice enough to see me as a ghost on our video right now. Don't worry, I don't usually look this way but hey, maybe when I'm dead and as a ghost, you'll know what I'm going to look like but it's great. I love it. You look like you're in a nice sunny area. Tell us a little bit about your journey, how you help dentists, how you got into your business, walk us through that path.

Joshua Kim:

Yeah. My background story is very interesting. I've had a lot of people comment to that effect. I used SBA loans to actually buy my first businesses at a very young age. And it was through that process that I learned there's a lot of inefficiencies with most banks and how they run their SBA programs. There's a lot of that information that circulates out there and it was through my own ventures that I realized that you can really get a lot done with SBA loans. It's just a matter of finding the right banks to work with and understand really the process that you have to go through to get it done. And so anyway, I recently exited from those businesses and I'm doing a couple of different projects all centered around in some capacity, making the facilitation of getting SBA financing easier both for dentists, doctors and other business owners. I've been spending a lot of my time though with dentists because it's a big area. There's obviously a lot of continual capital needs and it's a matter of a lot of the banks not being good at educating dentists on what their service offerings are.

Kiera Dent:

For sure.

Joshua Kim:

I took a lot of my own direct ... My direct experience with getting financing, understanding all the mechanics of it, understanding all the variables that go into if a bank wants to do a loan or not and having a large Rolodex of lenders across the country that specialize in SBA financing has been something that's been a big help for me in working with other people because I know what the banks are looking for. And so when a client comes to me and says, "Hey, here's what I need to do. I need to do a startup or I need to do a construction."

            I already know in my head, which lenders are the ones that I will want to steer them to. Not every bank is built the same, they have different credit boxes, they have different deal appetites. And just because you get declined for your deal, doesn't mean that your deal is bad. It just means you're talking to the wrong lender, 99% of the time.

Kiera Dent:

Interesting. That's a super ... Tell us a little bit about your businesses that you're in because I love to always know, what were your businesses in that you wanted [crosstalk 00:03:46].

Joshua Kim:

They were actually in healthcare. Yeah, they were actually in healthcare. They were in the home health and hospice space. It was not a sector that I was particularly enamored with because there's very high incidences of fraud. It's very hard to compete. It's a very dirty business. And so I was glad to exit and just be done with them entirely but I ran those for a couple years. I learned a lot about hands on operations. I'm very familiar with the nuances and the headaches of medical billing and the nightmares you run into with a lot of that, albeit the payer sources for Medicare home health is primarily Medicare but we did have some partial pay and I understand the whole model and the whole headache of medical receivables.

            I ran those for a little bit and it was going through the COVID time that I realized that ... Especially with PPP, EADL and the general clusterfuck of a rollout that both of those programs were, that a lot of business owners realized, "Hey, I really need to have a relationship with my bank. I really have to have a better idea of what's going on."

            And so that gave me the idea to maybe start some sort of business that helps other people connect to capital, based on what they need for their businesses, right.

Kiera Dent:

Sure.

Joshua Kim:

And so a lot of ... I come from a background, my own personal background where I understand a lot about it. And so I just sometimes assume that other people have this breadth of knowledge around these different programs and options. And I have to always remind myself, especially with dentists and doctors, they went to school for 10 years to go practice dentistry. They didn't have time to go learn all the nuances of government guaranteed finance instruments like I did at the time that I spent trying to go get my deals done but yeah, that's just a couple of random points of view on SBA financing.

Kiera Dent:

I like it. Okay. Walk us through because obviously SBA financing, I know PPP, a lot of people are familiar with those. Those are buzz words. A lot of people got that funding. Walk us through your experience with the SBA loans. What are some of the tactical things that we should know because even myself, I was looking to possibly buy a building for our headquarters and that opened the whole ramification. It's duly zoned of residential and commercial. And I'm like, "I could do residential all day long."

Joshua Kim:

Yeah.

Kiera Dent:

Commercial feels like this, "Oh, my gosh. This feels terrifying."

            I was like, "Wow, there's a lot that's involved."

            Walk us through what you guys do, how you get the SBAs, all the things we should know so we're not, I would say naive, when we're going to the bank and saying, "I need funding."

Joshua Kim:

Well, that's the thing. The bank doesn't care if you're naive. In fact, to some degree, they don't care because they like to see people who know how to run their business, right. Whether you have the high level or lower level of financial sophistication with navigating and asking about the different loan products, they don't really care. All they care about is, "Do you know how to run your business and is your business making enough money to cover the loan or whatever you're potentially wanting to borrow?"

Kiera Dent:

Sure.

Joshua Kim:

Obviously, PPP and EADL are out there. I don't really specialize in helping people with those. Those are [inaudible 00:06:33] loan products. They're only here for a limited period of time. The main programs that I help with are the 7a and the 504 programs. Those have been the ones that have been around basically forever. It's what I used several years ago to buy my businesses. And so the main differences between them is 7a, you can use it for basically anything, whether it's refinancing other debt, buying out a partner, buying another business, general expansion capital. You can also use it for real estate, tenant improvements.

            504 is more limited to just real estate, tenant improvements. And you can also refinance heavy equipment into that but 504, what I would generally characterize it as, is the real estate only. For your situation, looking at a building that's duly zoned, there are ways to actually get those done. It comes into a couple of nuances and I would be happy to help you offline with walking through that but the SBAs SOP, the standard operating procedure for all these SBA, 7a, 504 loans, it's a very long document. And so that's why there are a lot of nuances because it is government tied. A lot of people have the misconception that SBA loans, you actually go to the SBA to get them. You actually don't, you go to a bank. And the way it works is the government is guaranteeing a portion of the loan. For 504, they're guaranteeing 40%. For a 7a loan, they're normally guaranteeing 75 but right now, it's actually 90 because of certain stimulus incentives they passed back in December.

            That's a little bit about the high level of the loan programs. I think what would be a good thing to segue into, is some of the biggest myths that I help break for people is ... The main one is ... And I touched on it earlier, not all banks are created equal. Just because you get a decline at one lender doesn't mean it's not going to work for another. I had a dentist I was working with, he was trying to buy a building. He had multiple offices and the guy was making over $2,000,000 a year, right. There was no reasons the banks should have asked him to put down 30% on the building. The building he was looking at buying, he was going to move one of his locations to it. And the mortgage was going to be less than the lease. It would have actually improved his cashflow.

Kiera Dent:

Sure.

Joshua Kim:

And the bank wanted him to put down 30%. And he's like, "Why should I put down 30% on this building? I only need to, according to SBA rules, to put down 10."

            And they're like, "Well, we want 30%."

            And unfortunately, the problem is that most of the big banks out there, Bank of America, Chase, Wells Fargo, they suck at delivering on these. If you look up the list, Bank of America doesn't even break the top 60 SBA lenders in the country by volume. And to think about that, that's crazy but the most aggressive lenders out there are the ones that are more specialized in SBA because think about it, Bank of America doesn't have to finance that loan. They're a multi-gajillion dollar bank. They don't care.

Kiera Dent:

Right.

Joshua Kim:

It's the smaller banks that are more aggressive, that want to make the money, that are being aggressive and getting creative and getting them done. That's the biggest myths that I like breaking for people. There's a couple of other ones, that SBA loans take a lot of paperwork, like you were mentioning. It's actually going to be less paperwork going SBA than if you did a residential mortgage. If you go residential, there's going to be a far, far more amount of paperwork you have to go with and there's going to be a lot more headaches, will probably take longer to close. All the credit factors that they're looking at for that are different than what they'd be looking for in the business.

Kiera Dent:

Yeah.

Joshua Kim:

Just a couple of different factors there.

Kiera Dent:

Because I was told ...

Joshua Kim:

It really doesn't take as much time and paperwork. Yeah, it doesn't.

Kiera Dent:

[inaudible 00:09:35] on this because I was told it was going to be ... I can close on a residential home in two weeks to four weeks, depending upon how the funding goes through. However, on an SBA loan, I was told it was going to take me between two and three months to be able to close. And I was like, "What? This feels insanity."

            Hello, Dental A Team listeners. All right. One of my absolute favorite quotes is, "You are always one decision away from a totally different life."

            What life do you want to have? Do you want more accountability? Do you want a team that's trained? Do you want to have somebody who thinks outside the box and creates just for you? Do you want to have a coach? Do you want to have team training? Do you just need somebody to kick you in the rear and get you going? Okay, don't worry. I'm in every single one of those boxes. And that's why we created Dental A Team silver, gold and platinum. It's going to be customized team training for you on the terms you want. Silver, silver is more for accountability. Gold, gold includes all of our online training plus the accountability. And platinum includes all of that and in office. You guys, I would strongly suggest you go join Dental A Team gold today because you're always one decision away from a totally different life. What are you waiting for? Hop on over to the DentalATeam.com today. You guys, we only have so many spaces. Get over there today and sign up for Dental A Team silver, gold or platinum

Joshua Kim:

Here's what I'll tell you. The reason SBA loans take a long time, usually it's because the borrowers don't have their stuff together. You can get your approval turnaround from the lender within two weeks, if you get all the documents together, you submit them, the financial package, the tax returns, the profit and loss statements, all this stuff they need. They can get an approval turn around in two weeks. Can you close it in three weeks after that? Yeah, it's possible but it rarely happens just because the borrowers usually don't have all their stuff together. A lot of it comes into how organized you are as a borrower. If you have your affairs in order, your accountant is quick to deliver all the items that are needed, you have copies of your leases, your insurance items, whatever's needed for the bank request for closing, you can get them done pretty quickly.

            I've seen deals go from application to funding in less than a month but those were the instances where the borrowers were prepared. They had all their documents [inaudible 00:11:44] and they were ready. When bankers tell you, "It can take up to two or three months."

            It's usually because that's the average with a very inexperienced borrower who doesn't have someone guiding them and helping them plot out what the steps are and what's going to be needed, right.

Kiera Dent:

Sure.

Joshua Kim:

And that's where I also help. My role with people is I come in, I analyze the business, I try to understand how much capital they're looking to raise. We consult with them on what lenders are going to be probably the most aggressive to go with that. We get them connected but we're also there obviously through the closing process. Once the approval is formally given, helping the borrower navigate all the documents they have to pull together for the lease item, the landlord subordination, the property insurance, the general liability insurance, all those things that are some of the more nuanced items in closing that can take people a long time to get done, we're able to help guide them through that process on how to get it done as quickly as possible.

Kiera Dent:

I like that. I'm going to ask a question, if somebody is wanting to get ready to go for their SBA loan, you said having all their documents in order, making sure that they're a prepared borrower, what are some of those things ... I don't want you to give away your secret sauce because I'm sure this is [inaudible 00:12:48].

Joshua Kim:

Oh, there's really no secret sauce to it. I'm completely transparent about what we do but the bank is going to give you a list of all the stuff you need. It's going to be your last two years tax returns, profit and loss statements, balance sheets for the business, a couple of other reports, accounts receivable, accounts payable. You're going to have to draft some short narrative on the loan request, what you need the money for, what your business does, just basic questions. It's nothing too complicated or too crazy but especially now this time of year with tax season on us, what I've seen delays on is usually it's getting certain financial reports from their accountants. That takes a long time. And look, I have some dentists I'm working with right now, I gave their accountants the checklist of stuff we needed two months ago. I'm sorry, two weeks ago. And we haven't heard back from them because they've been so busy. If you have good relationship with your accountant and they're generally organized and have all your stuff together, it's not going to be too hard.

Kiera Dent:

Okay. Also, I was curious, when you were talking ... I know a lot of people right now with SBA loans are interested in the SBA loan because what I heard ... Again, I'm super naive on this, just hearing this, that a lot of people are trying to get the funding because the interest rates are really low. They're waving a bunch of things. It's a three month they're going to pay.

Joshua Kim:

Yes.

Kiera Dent:

Is this all true? Walk us through, is now a good time to be borrowing?

Joshua Kim:

Yeah. Now's the best time to be borrowing. Statutorily, there are maximum interest rates on SBA loans. Right now on 7a, the maximum interest rate is actually 6%. If you've got a credit worthy dentist and they need capital for something and that's the max obviously, usually it's lower. If it's just a regular ten year loan, five to five and a half percent, if you're using the 7a loan for real estate, you can get below 5%. If you go with a 504 loan, you do it for real estate, you can be looking at a 25 year term at three and a half percent, sometimes less, depending on which lender wants to go bid on it. Some get really aggressive and can get even lower than that but they are waiving all the guarantee fees and normal fees that get lumped into the loan. For a 7a loan, that's usually about three and a half to 3.75% of the deal. If you borrow a million dollars, the savings just off the guarantee fee are 35 grand.

Kiera Dent:

Right.

Joshua Kim:

They are paying the first three months of the loan for you. It was six, they cut it down prior to this last stimulus package getting passed because they weren't sure they were going to have enough funds to cover all that but they did get more funds with the most recent stimulus bill. And the general thing we're waiting for, is for the SBA to come back and say, "Hey, we had more funds added to the bucket. We're now going to bump them back to six months."

            ... but we don't know when that's going to happen exactly. Yeah, you're right. Right now, if you get your loan approved today, it's three months.

Kiera Dent:

I'm curious and this is me again being naive, which is why I love podcasting with people like you because I'm like, "I can ask all my, 'dumb questions.'"

            ... but I know you're not going to think I'm dumb because ...

Joshua Kim:

Dumb questions are ... Well, that's the thing, I don't think ... Okay, I will [inaudible 00:15:25]. I think there are such thing in life as certain dumb questions but for the purposes of this, I think it's really good to ask those elementary 101 level questions because most of the audience are dentists. They're busy, they're running other stuff. They don't have time to go figure out all the nuances. It's not a productive use of their time. They went to school for 10 years to go do their thing. I didn't, I know what I know not because I went to [inaudible 00:15:45] school with it but that's where having different areas of expertise overlapping is great on podcasts like this because people can ask those 101 questions and we can answer it for the audience because they're probably also thinking the same thing.

Kiera Dent:

Okay. And walk me through the difference between ... You said 7a, 504a. Walk me through those different loans and what I would use each of those loans for.

Joshua Kim:

Yeah. The 7a loan is going to be used really for anything. If you need it for a business acquisition, if you need to refinance debt, get growth capital, buy equipment, if you need to buy out a partner or buy a building, get capital for improving on a building, there's really a very broad use of things you can use a 7a loan for. 504 is the one that's a little bit more narrow, in that it has to be tied to real estate in some capacity. You can use it for refinancing a mortgage. You can use it for buying a building. You can use it for getting capital to expand on/improve on a building, if you need tenant improvement capital. One of the more recent things that they did add into the rules, you can now refinance heavy equipment.

            I'm working with a vascular surgeon in California. We're going to be refinancing about $700,000 worth of equipment into their 504 loan. And so what that's going to do, it's not going to save them a ton of money in the interest rate but it's taking their loan from a seven year term out to a 25 year term because that money is getting lumped into the mortgage, which is a 25 year loan. Instead of them paying $8,500 a month for that equipment note, it's going to drop down to like 3,700. That's a huge cashflow savings for them, almost $5,000 a month in their pocket, just by refinancing that debt into a longer term loan.

            And so there's a lot of different things. I structured a lot of stuff for them and the net cashflow savings that they're going to have by getting these 504 loans and working with me, it's about $25,000 a month, is what they're going to be saving between their two locations. Now's the time to borrow. And again, that doesn't even count the first three to six months of the payments that they're getting subsidized. That's just on a going forward basis, their payments are X and X is 25 grand a month below what their expenses are right now between how they have all their stuff capitalized. Yeah, it's really great.

Kiera Dent:

That is really cool. Okay. I'm going ask another question on this of ... I've heard two different opinions on it. I'm curious on your opinion that right now, there's two sides of this coin. One is, don't buy because right now is a great time. There's capital or I would say commercial real estate is down. Not buying right now, there's a lot of people that can't rent, so you're on a cheaper rent. Just stay on a cheaper rent versus buying a building. And then the ...

Joshua Kim:

There's a lot of people that can't buy and can only rent or ...

Kiera Dent:

No, they could do either one. Renting because rent is cheaper because not as many people are in commercial real estate. Commercial real estate is down because so many people are working from home now, so commercial real estate is down. On the flip side of that coin, people are saying, "No, now's the time to buy commercial real estate because it is down. It's low and SBA loan percentages and interest rates are lower."

            It's like which side of the coin ... And so I've heard different things of like, "No, take advantage of this. Keep your cashflow higher because then you don't have to actually invest into a building and tie up that cash."

            Versus like, "No, buy because it's low."

            What's your take on this? I don't think there's any right. I'm just curious on your opinion on it.

Joshua Kim:

I'm not going to opine on the general state of the commercial real estate market as a whole. I definitely think that it depends on the localized market that each person is in. I know certain markets are up, certain markets are down. It really depends on the individual situation of the borrower. I'll give you an example. The surgeon I'm working with, they're currently renting both of their locations, they're paying through the nose rent. And so for them, they're planning on being in this building for the next at least 10 years. And so for them to purchase, they're getting an okay deal right now. Could it be a little bit lower if they waited six months? Maybe. I don't know, they don't know. Nobody has a crystal ball.

            It really is going to depend on the individual situation of each person and what your five year, ten year, 20 year plan is. If you're planning on staying there the whole time and you think it's a good price, I'd say go for it because if you're going to be there for an extended period of time, the money that you would save by having it go back into your pocket as a mortgage versus renting, would be worth it but at the same time, if there's certain markets and you might think you're only going to be in that practice location for two years and you might want to move it somewhere else or get a bigger place, it might not be the choice for you. It really depends. And it's hard to say without understanding each individual person's situation.

Kiera Dent:

Sure, I like that. I like that answer. Okay, next question. This is a little easier. I hear from a lot of new grads that they struggle getting financing because they're coming out from school, they don't have a lot of information. And I know when we bought our practice, the doctor I was working with, she went to seven different banks and we ended up getting a ... A local bank was the one who actually ended up funding us, Bank of America and those larger banks would not fund to us. We had to be really scrappy. She had to write this whole 30 page approval as to why we were great, why she could do it. Walk me through how do new grads get funding when they don't have any backing. What are some of the tips you have for new grads or doctors who maybe are buying their first practice?

Joshua Kim:

I'll tell you this much, it's a lot easier to buy revenue than it is to create it. And so when it comes down to, "Should I buy a practice or should I start one?"

            With few exceptions, we'll recommend just going to buy one, especially if you have a warm relationship in a market, you have someone that's looking to transition out. And there's lots of ways to structure it. Generally, the lenders that I work with, they want to see at least one year of actual on the job experience. They don't want to ... The day you graduate school, in all frankness, yes, you have general understanding of dentistry but you don't really know it until you get that on the job training. There's always that on the job training in every profession of life, that you learn most of what you actually need to know for day to day. Most of the lenders I work with, they would prefer to see at least a year of experience as an associate at a practice. If they're going to go buy the practice that they're working at, that is a slam dunk deal. We can get those done all day long. For practice startups, there definitely are more hurdles to do that. The one you were talking about with your office, did she acquire the practice or did she start one?

Kiera Dent:

It was acquired and it was right out of school but what she did is she made sure her last year, her fourth year production numbers, were so high. She cranked her numbers.

Joshua Kim:

That's the way to do it, yeah because then they look at it and say, "Okay."

            ... because here's probably why that was a little bit easier to get done than most other people. She had actual on the job experience of some limited degree that others might not have that same level. When they look at production volume, that is something that a lot of people are looking at, is they want to see, "Okay. Well, you individually on a standalone basis, how much volume are you? What's your gross collections?"

            The good thing about dentistry though, is you don't have to be the best business person, the best manager in the world to make money, right.

Kiera Dent:

Right.

Joshua Kim:

And so banks understand that and they understand it's an owner operator type thing. You've got personal relationships with the patients. Yeah, it's definitely easier to buy a practice than it is to start one. If you do want to start your own, I would recommend at least one year of associate job experience at another practice, that's going to be huge for the resume. And frankly, the one year of on the job experience you're going to have, you're going to learn a lot about how a practice actually runs, right because in school ... School is school. You have the textbook version of how things are and then you get thrown into the cruel real world and you see how it's really done, right.

Kiera Dent:

Right.

Joshua Kim:

And so the banks, especially the SBA banks, they understand that there's a significant disconnect. And a lot of times I'm like, "Hey. Hypothetically, here's how it is."

            Versus what it actually comes out to be. For a new grad who wants to start a practice, I would recommend probably a year or so of on the job experience. I do have relationships with traditional lenders who will do ... The Bank of America's and whatnot. Sometimes for the first practice, those options can be a little bit better than SBA because they will offer it on a 10 year term at a slightly lower rate than 7a but where I will tell you 7a comes in a lot better, is for the instances like your partner's situation you were mentioning, where the conventional lenders didn't want to touch it. They thought it was too risky. That would have been an SBA deal all day long. She would have had a little bit of an uphill battle to get over about like, "Hey, I'm brand new."

            ... but I think there would have been enough to mitigate that. And the other thing too, is the conventional lenders, they're only going to help you out up to about a million dollars. Above and beyond that, all the big players, TD, Citibank, Bank of America, Chase, they're not going to be able to help you. As soon as you need to go back to them for a dollar more than that, sorry, they've cut you off. They've clammed up.

Kiera Dent:

And why is that?

Joshua Kim:

And that's really where SBA can ...

Kiera Dent:

Do you know why that is?

Joshua Kim:

I've actually had some conversations with people who used to be in the banking world at some of those institutions. And the way they viewed it is dentists are great ... From a macro credit risk perspective, most dentists are great just running a single practice. And a million dollars is generally more than enough to accomplish that.

Kiera Dent:

Sure.

Joshua Kim:

And the second they need more than that, it's usually because they're trying to open a second office and I'm not saying that inherently, all dentists suck at running two offices but the execution risk goes up, right.

Kiera Dent:

Sure, absolutely.

Joshua Kim:

... because you have to juggle two balls.

Kiera Dent:

Right.

Joshua Kim:

And so Bank of America, they've looked at the statistics and said, "Okay. Well, just as a flat rule, this is what we're doing."

            And for the most part, that's what the other lenders do but that's what's great about SBA, is because there's a 75 to 90% guarantee on the loan, the banks aren't really that concerned. They're not really that concerned about it as much. And I think something that would definitely help a newer grad, is if they had ... If they brought in a more senior dentist, they gave them five to 10% of the practice to help coach and guide them on how to run it, that would carry a lot of weight. Even if that other dentist is not going to be a guarantor on the loan, having someone there with more experience, more knowledge on how to run something day to day is going to be a huge carrier.

            That's how I got my first deal. I was 19 when I bought my first business. The reason I was able to get it done is because I had an operating partner who had 12 years of industry experience in that specific industry. We went to the bank, it wasn't a 19 year old asking for $1.2 million to go buy a health care company. It was a 19 year old and an experienced administrator. I joint ventured, I partnered with his experience to get it done. Obviously, for a situation like a dentist, it's a little different, not as needed but you get the same idea.

Kiera Dent:

Sure.

Joshua Kim:

You can strengthen your deal, going to the bank by bringing in someone else who's got some more experience and just giving them a little bit of the operation. That's one way to bridge it, if it is a problem.

Kiera Dent:

I like it. Okay, my last question. Who knows? You keep saying things and I'm like, "Oh, what about this? What about that?"

            I love it.

Joshua Kim:

Feel free to keep shooting, I got time.

Kiera Dent:

This is fun because guess what guys, I podcast on purpose because I get to go find all these amazing people, ask them the questions I want to know. And it's just great, I love it. Thank you for your time today. Let's say that I'm going to do a remodel on my practice. I'm thinking of a doctor I've got right now, she's got a two op practice. It is so small. She's getting so many new patients and she's expanding. She's looking to see, "Do I add on a chair to this practice or do I go buy another location?"

            It's a twofold question. One, is how much should people be looking at when they're going to do that? Do they get base minimum? Is there a certain percentage? If I know it's going to cost me 50,000 to build this out, should I be adding more to my loan just for that working capital and by how much is that percentage? That's question one. How do you decide that?

Joshua Kim:

I'll just put it this way, it's better to have the money and not need it than not need the money ... Or to need the money and not have it, right.

Kiera Dent:

I agree.

Joshua Kim:

The banks understand that. And they're usually pretty generous, especially with practice build-outs. There's always unexpected costs. One of my mentors, he always says, "Things always take twice as long and twice as much money as you think they will when it comes to those projects."

            And just inevitably, we're optimists as people. And so we want to think it's going to take this long and whatever. Back to your earlier question, how much can you borrow? The way that they base how much money you can borrow for an SBA loan, if it's an existing practice, they're going to be looking at the historical cashflow of the business. What is the cashflow available? And there's different metrics they use. They're usually looking at the adjusted net income. After you add back your trips to Tulum, your family outings to Disney that you run through the practice for tax reasons, all that other miscellaneous stuff that's not directly related to actually running the business, you got that back, you come up with your actual net income number, right. That's the number they're going to be looking at.

            And generally speaking, they want to see at least a one and a half times debt service coverage level. If your cashflow annually is let's say, $600,000, the most that they would want to lend you is whatever the amount is to where $400,000 a year is your debt service. I don't have the math in front of me, it's probably 1.5 million, right. General rule of thumb, you just take your cashflow, multiply it by three, that's generally a comfortable limit on how much they would lend on a regular 10 year loan.

            If you're buying a building, obviously the numbers are different because you're looking at a 25 year loan versus a 10 year loan but if you've got ... For your situation, I'd be happy to connect with you offline about it but if she wants to go purchase a building, I have lenders that will 100% finance a building acquisition with an SBA 7a loan. If they consider it a rent replacement, meaning it's roughly going to be the same cost as your rent and you're moving locations so you can own it, they'll a hundred percent finance this. That would be a great option for her because she'd be able to go get all the capital she needs to buy the building but also the money there to provide for extra working capital to build out, add the extra chairs, set it up however they need. And you can make a gradual transition over three to six months period from wherever your existing location is over to the new one and not have a major interruption to revenue.

Kiera Dent:

Interesting. I like that. There's so many pieces to this. Obviously, my mind's buzzing. I'm sure a lot of people listening are buzzing. If people want to get in touch with you, how is the best way for them to do so?

Joshua Kim:

Yeah. We can put a link in the podcast description below for the folks that are on their computer. My website is 7accelerator.com. Our company name is 7a Accelerator but we did that for simplicity purpose. My direct email is Josh@7accelerator. If you go to our website, there's an option there to just book a call and just make a mention you heard us on Kiera's podcast here and we'll know where you came from but yeah, you can go there, schedule a call. We'll have a quick 15 to 20 minute exploratory call with you, understand some high level key financial metrics about your practice, how much money you're looking for. We can generally tell you what's going to be reasonable based on the numbers we're hearing. Don't quote us, don't crucify us on them. Those are always rough estimates and everything is subject to credit approval from the bank and approval, blah, blah, blah but I've been doing this long enough where I have a very good idea if something's doable or not.

            And look, if something's not doable, we'll be transparent, like, "Hey, you're not going to get this much money for this building. You're probably going to qualify for this but you're not going to qualify for that. Either we wait and we wait for your cash flow to increase some more and you get another tax return on your belt. Or we find some other project that works."

            ... but what I generally tell people, is if you've got a cashflow positive business, you have a pulse and above a 650 credit score, we can generally get you some capital. I have a lot of other funding resources that we can refer out to if it's not SBA, if you need something smaller, maybe a $50,000 working capital line. I have relationships with equipment financing people. Even if it's not an SBA loan specifically you're looking for, I may be able to have resources to direct you to that would be of value. And I I'd be happy to share those.

Kiera Dent:

Awesome. And Josh, just for my own curiosity, how do you guys get paid? I'm guessing you don't just do this because you're ... I'm sure you're [inaudible 00:31:12].

Joshua Kim:

Yeah, no. This is not a charity.

Kiera Dent:

I'm like, "How does that work?"

            Just so that when they're looking to reach out, I like to [inaudible 00:31:18].

Joshua Kim:

Yeah. Typically, how we do this is we roll a consulting fee into the loan project. For a typical request, we lump it in about $6,000. And what that's going to cover is our time basically helping you collect all the documents, draft the business plan, review the financial projections. And there's a lot of value in having someone like me involved in a project versus going to a bank directly because ... And I'll tell you this, the banks want to get every single deal done they possibly can. And that's another big misconception that people have. People think of banks as these greedy money, money hoarding people that are just sitting on a pile of gold in safe and they don't want to give any of it out. That's not how banking works. They don't make money until they loan out money. And especially with these SBA loans, they're very aggressive in wanting to get them done.

            What they like with me, is I can actually work with a client if I see something in their business plan that would disqualify their project for SBA eligibility. Let's say you wanted to buy a building and you were planning on leasing out 75% of it and only taking 25% of it for yourself. I would tell you, "Hey, in order to meet eligibility, you have to do it this way. You can lease it out after but you need to occupy 51% of the building when you get the loan."

            Different nuances like that. And the banks can't ethically tell borrowers directly how to go through all the loopholes but I understand what those are and I'm not going to explicitly tell you like, "Hey, do this."

            ... but I'm going to say, "Hey. If you fix this, it becomes eligible and the problem goes away."

            Draw your own conclusion. There are benefits of working with us on that. I also have a sister entity called Mount Britton Capital Advisors. I started that with another partner of mine who's another big MNA entrepreneur, has bought and sold dozens of companies over his career has made a lot of money on it. And we set that up for the more complex transactions. I'm working with a couple ... I'm actually working with a very big name doctor, I guess I can drop his name. I've been on his podcast. There's only so many. You guys could probably figure out who it is.

            Yeah. I'm actually helping Mark Costes look at some financing first and practice purchases and stuff and a couple of other dentists with multiple locations. For the more complex needs, the engagement cost is a little bit higher than the 6,000 but the way we usually structure it is with a minimal deposit down and the balance at closing. And the nice thing about working with us is any fees paid to consulting, accounting or lawyers as part of getting a deal done, will count towards whatever the equity injection is. In the case of your dentist, let's say they wanted to go buy a building or something and they have to come up with a hundred thousand dollars at closing, if they pay us 10, their lawyers and accountants tend to get the deal done, they only really have to come up with 80 grand at closing.

Kiera Dent:

Got you.

Joshua Kim:

That's one of the nice things about working with us. You're effectively able to leverage our expertise and pass and it's no real extra money out of pocket.

Kiera Dent:

Very cool. Well, I actually know Mark Costes very well. He and I were business partners for several years. He's such a good guy, love that you're working with him. Okay Josh, you've been amazing. You guys, go check him out. If you guys need help with this capital, finding out ways to do it. And honestly, if you guys are even thinking about it or you've got a doctor thinking about this or you're wanting to expand, I think now's a great time. Josh, thank you so much for your time. Thanks for being on the podcast. I'm excited. Again, just drop your information so in case people missed it, they can reach out to you.

Joshua Kim:

Yeah. I'm sure we'll put it in the link in the description but the website is 7accelerator.com and you can reach me directly. You can obviously reach us through the web portal, just booking a call there or you can reach me directly to schedule something. It's [email protected]. It doesn't matter if you need a hundred grand, if you're going to go try to raise 10 million, we have resources and lenders that we'll be able to work with you regardless.

Kiera Dent:

Awesome.

Joshua Kim:

And like we said, now's the time because they're literally paying you to borrow money and they're waiving all these fees and those fee waivers and incentives are only good through October 1st. I wanted to make sure we got the drop dead date in there. As long as you get your loan approved prior to that, you are good to go.

Kiera Dent:

Awesome, super helpful. Well Josh, thank you again so much. Thanks for being just a great resource for all these doctors that I love so much. And all of you listening, thank you guys so much for listening and we'll catch you next time on the Dental A Team podcast. And that wraps it up for another episode of the Dental A Team podcast. Thank you so much for listening and we'll talk to you next time.