Practice Debt Restructuring
& Balance Sheet Optimization
A practice burdened by fragmented, high-rate legacy debt is a practice transacting at a discount. Lumina Medical Capital restructures the balance sheet before the exit event — consolidating obligations, reducing monthly service burden, and engineering the EBITDA profile that commands a premium multiple.
Intelligence Report — Node 09
How Practice Debt Suppresses Your Exit Multiple — and How to Fix It
Lumina Medical Capital regularly conducts pre-exit financial reviews for Arizona optometry practices. The most common finding is not insufficient revenue — it is a balance sheet carrying legacy debt obligations that are individually defensible but collectively destructive to EBITDA quality.
Consider the Scottsdale practice generating $1.4M in annual collections. It carries four separate debt instruments: a 2019 equipment note at 7.2%, a 2021 OCT lease at a high implicit rate, a personal guarantee line cross-collateralized with the practice, and a working capital advance at a merchant rate. Combined, these obligations consume $148,000 in annual debt service — suppressing adjusted EBITDA by $148,000 and, at a 7x multiple, erasing $1,036,000 from the eventual transaction value.
Restructuring that debt into a single, properly amortized SBA or conventional instrument — with a lower blended rate and extended term — can recover $60,000–$90,000 in annual EBITDA, adding $420,000–$630,000 to the terminal transaction value at that same 7x multiple.
Diagnostic Framework
Five Balance Sheet Conditions That Demand Restructuring
Fragmented Equipment Obligations
Multiple equipment notes at varying rates and terms — each individually originated as a point-of-purchase decision without a portfolio view. Consolidation into a single term note typically reduces blended rate by 1.5–2.5% and simplifies balance sheet presentation for a future buyer's underwriting.
High-Rate Working Capital Advances
Merchant cash advances, revenue-based financing, or short-term credit lines originated during a cash flow gap. These instruments carry effective annual rates of 18–45% and appear on the income statement as debt service that a buyer's EBITDA analysis will normalize — reducing the adjusted earnings they will fund.
Personal Guarantee Cross-Collateralization
Practice debt secured by personal real estate or personal guarantees that encumber the physician's personal balance sheet. Restructuring separates personal and practice debt — a critical step before any DSO or institutional buyer conducts personal financial review as part of their due diligence process.
DSCR Below 1.4x
A debt service coverage ratio below 1.4x signals to a buyer's lender that the practice has insufficient cash flow headroom to service the acquisition debt that the buyer will layer onto the balance sheet. This structurally limits what buyers can offer — regardless of the practice's gross revenue or goodwill value.
Balloon Obligations Within Exit Window
A practice carrying balloon payment obligations maturing within 12–36 months of the planned exit date faces a forced refinancing event that may occur at unfavorable terms or compress the transaction timeline. Restructure now, on your terms, before the balloon forces the issue.
The Lumina Restructuring Protocol
Lumina conducts a comprehensive balance sheet review, identifies all restructuring opportunities, and engineers a single capital event that consolidates obligations, extends terms, reduces blended rate, and delivers the EBITDA profile that commands the multiple your practice deserves at exit.
Every Dollar of Debt Service
Is Seven Dollars of Exit Value.
At a 7x EBITDA multiple, every $10,000 reduction in annual debt service adds $70,000 to your terminal transaction value. The restructuring engagement typically costs far less than the exit value it recovers. Begin with a confidential practice equity assessment.
Initialize Practice Equity Assessment →Complimentary assessment. Institutional advisory.