Very good question. What banks are most concerned about is exactly what they should be concerned about - cash flow. They will look at the practice you are applying for and analyze the cash flow. They will assume the practice is going to collect what it has been collecting. A trend in growth is very positive, specially if there is good equity in the office, makes banks more confident about their lending. Then they will look at the practice expenses, normalizing some that tend to be inflated by the owner ( I hope the IRS is not watching this) Net profit is usually hard to inflate, as collections and expenses both have receipts/documentations attached to them (i.e. bank statements). Then they will subtract payments on the loan for the practice, payments on buyer debt (school, auto, credit cards, mortgage, etc) and buyer reported living expenses. If there is enough wiggle room after everything is paid for it's going to be a go. The formula is usually 70% of the office collections minus all office debts (practice loans, etc) = What the practice is worth (owner's equity). Ofcourse there is other personal debt than can lower that equity down when personal financials are added to the picture. But there is an if, a big IF.
The bank will evaluate your actions concerning money. Doctors are notorious about living beyond their means. The last ADA study on retirement showed that only 5 % of dentists could retire at age 65. That's after 35 years of above average income. The problem seems to be the doctor supporting his/her family in a way that doctors "should" be supporting them. I.E. the best cars, big home, best vacations, best private schools for the kiddos, best colleges, you name it.
Here's what the banks want to see. Cash in savings, $25-50k. Yep. No credit card balances At least small balances, otherwise your FICO score is hit hard due to high utilization. Reasonable cars It's best to have a car under the business, so it doesn't show on your credit report as a debt, maybe even without car loans. Renting a home, not a mortgage. The amount of school debt only matters in the cash flow exercise above.
So get some $ into savings. It doesn't need to be yours. They won't ask you where it came from and they are not going to expect you to use it for a down payment. They want to loan you the whole enchilada. Use your credit cards, but pay them off every month This is referred to as "no late payments" and a big part of building credit/great scores.. Don't go out and lease two big $ cars. Wait for the house and cars until after you buy your practice This is probably the most important factor of all. I was trying to help a young dentist buy a practice. When we got to his bank application, I found out that just one year out of school, he had bought a $440k home, had over $100k debt furnishing it, had over $1100/month auto lease payments (2 cars) and almost $400k school debt. His property taxes on his home were almost $9k per year and when you added it all up he couldn't get a practice that cash flowed enough to make all the payments. Because he had no "Equity", and exposed himself to maximum risk.
So bottom line: Get your finances in as much order as you can. Continue to live on beans and tators and pretend you are not a doctor. You didn't want to hear any of that, I'm sure. Just lead a reasonable modest life that won't require you to work until you are 80 to get any time off. You can live a little too, it's all about planning and convincing banks to work with you if you have a vision and a record of success.
Questions encouraged. More later