How To Choose Bank Loans for Your Dental Practice – Dental Practice Management




Introduction: 

Every venture in this world needs financial investment. Same is true for dentists also.  Establishing a new dental practice or expanding an existing dental practice also requires investment. However, then it gets tricky. Arranging finance is not easy, and any wrong choice can put you in a financial spot.

What After BDS



Two types of dentists will need to raise the money for a dental practice

Young or New Dentists (Who are planning to start a dental practice):

  • Every young dentist who passes out from the dental school/college has the dream to establish his/her private dental practice.
  • All of them have the aspiration to establish the best and most comfortable dental clinic where patients will just feel like home.
  • It will be a dental practice which they hope they will be proud of.
  • However, these are the hopes of a young mind.
  • In a dental college, we have the liberty to dream because it does not cost money.
  • However, the moment, a young dentist steps out into the commercial world of professional dentistry, the reality comes as a big surprise.
  • Things do not seem as smooth as the young dentist had imagined.


Experienced Dentist with few years of experience (Who are planning to expand their existing practice)

  • The goal here is developing a current dental practice.
  • Upgrade it with new & modern equipment.
  • Expanding your practice to multiple locations.
  • Hiring more dentists and dental professionals to work for your dental brand.
  • Other business investments for your dental practice.


From here the real problems of Dental Practice Management Starts.

Barring a few who have a high financial backing or doctor/dentist background, for many first time dentists, it becomes a huge task.

At such a time the first point of worry for the young dentist is how to arrange the first financial investment to start a private dental practice.



Please note that establishing a dental practice is like peeling an onion that has multiple layers. There are many layers of problems to solve when a young dentist is planning to start a dental practice.

Gathering the finance for starting your dental practice, is just the beginning of the journey. There are many other things to solve before a dentist can hope to start a successful private dental practice.

You will have the following questions in mind before starting a clinic

The issues with a new practice are as follows.

  • What is a right & good dental clinic?
  • What is the minimum investment required to set this up?
  • Can I get a bank loan to finance my requirements?
  • What will be the timeframe required?
  • What kind of a place will be suitable to open the clinic?
  • How to go about the interior?
  • Where can I source all equipment & tools from?
  • Where can I get excellent staffs for my practice?
  • How do I get patients coming in?
  • When do I start maintaining accounts & record books?


We have previously discussed all the above points in another article, that tells you how to create a best dental practice with minimum investment. You can read the article here. (It will open in a new tab)

However, within the scope of this article, we will focus our discussion to



“How To Arrange the Initial Finance for the Dental Practice”

Dental Practice Management

It is the most stressful aspect of setting up a dental practice.

Whether you plan to have a small to moderate or a posh dental practice, the role of initial financial investment is very crucial. That can set the tone of your future progress.

However, before you get into arranging the money, keep these points in mind:

Start Low to Moderate: In our experience and staying in tune with the ever-changing financial scenario, it is always better to start small to moderate with plans for expansion in the future depending on the growth your practice is showing.

Starting low keeps you flexible: Do not commit to a big spending from the onset. Raise and incrementally spend the investments. It is just common sense. As the saying goes concerning money – Do not put all your cash into one venture, all at the same time.

Starting Low Gives you time to make correct choices: Starting a dental practice involves many expenses. When you have just raised a substantial money from the market then in the excitement of setting up your practice there are always chances for you to go berserk in your spendings. Be careful and starting low will keep you in check. It gives you the time to analyze the expenditures.

Starting low gives you a Saftey Net: You must have heard stories where people have gone all out in their spendings, and to their dismay, the venture did not succeed. A young dentist gets swayed by the romantic stories where the protagonist puts all the money in the line and narrowly wins the jackpot. Such stories do happen but 1 in 100,000. So, it is better not to take chances to be the 1 in that 100,000 when you have raised much money from the market. (and you are liable for returning that amount)



With these points in mind, lets us start decoding the issue of arranging the initial investment for your dental practice.

There are three ways for you to arrange the money for your dental practice:


1 # Ask your parents or very close relatives

The safest way to organize money considering that your parents have adequate finance left with them to support you without much strain. In this mode, you get the required finance within the family without the worry of paying it back (along with interest) within a specified period. It relaxes you considerably, and you work towards a successful dental practice in a better frame of mind.

Dental Practice Management

Problems: Though this is the safest way to get the finance for your dental clinic, it has some loopholes.

  • It makes the young dentist complacent as he/she has no psychological, financial burden. It sometimes results in the young dentist not being motivated to work hard enough.


  • There have been cases, where parents have given away all of their retirement funds or sold a land to generate money to help their child start a dental practice. Though they do it out of their love, we request you to think 1000 times before doing so. Such financial decisions have the power to put your family in an economic logjam. What if the practice does not click or takes much time to gather pace? Then your family will have no financial cushion left.


So, if you are planning to take a loan from your family, then it is imperative that you sit down with your family members and have a very open discussion about all the financial possibilities.

Also, never force your family to lend you money somehow even if they have to sell something valuable. This approach in most if the instances might not work out well for you.


See Next Slide to know 

The Second Method to Arrange the Finance

In this article, we are discussing the various ways for a dentist to raise that initial financial fund to start a dental practice.


2 # Ask your friends or raise money from private lenders

It is another way to raise money on a mutual understanding or a private legal contract between two individuals. It entirely depends on the level of agreement between the individual parties. However, before you enter into an understanding with any individual or private lender do proper paper works.

Never enter into a verbal contract.

When, signing or agreeing to a contract for borrowing the money, read the terms of the agreement carefully. It is for your safety so that you do not enter into any hidden clauses within the contract. 

I am not saying that do not trust people or friends. However, there is a difference between trust and blind trust. There have been many incidences where due to casual approach and overlooking the legal documents while taking a loan, individuals have landed into financial troubles. 

So, now you have been warned.


3 # Taking Bank Loans to Raise the Money for Your Dental Practice

Other than borrowing money from family, friends of private lenders, this is one of the most commonly used methods to raise funds for establishing your dental practice. A loan taken from the bank is regulated by the banking laws of your country.

It is one of the most organized sectors for every individual to raise money in a perfectly legal manner. However, there are many points that a dentist must consider before deciding to borrow money from the bank.

These points apply to all dentists irrespective of whichever country you belong. Follow these points very carefully when you take a bank loan.

Dental Practice Management

Bank Loans: If you are planning to take a bank loan to start your dental practice, then you have a difficult choice to make. You have to consider the banks that provide you a credit at a lower interest. However, the interest rate is not the only factor to consider.

What are the points to consider when taking a bank loan?

Interest Rate: The most important point to check first. Your goal should be to get a loan from the best bank you can manage at a lower rate. So locking in a competitive fixed rate for the next seven to 15 years is your best option.

Emi Options: Usually the bank checks your credit balance or the credit reputation of your guarantor before providing you a loan. If you are applying a credit for the first time, then the bank will offer you the lower loan amount and subsequently increase it after making sure that the finance is being used efficiently.

Guarantor: A first-time applicant for bank loan requires a guarantor with an excellent reputation or some security before approving the loan application.

Loan Term: While taking a loan you should consider the most extended loan term available (around 10 to 15 years). Breaking the credit for longer years will lower the payments. If your dental practice keeps pace and shows growth, then you have the option to prepay the entire loan in short segments.

Pre-Payment Option: Pre-payment options vary from lender to lender. Loan pre-payment terms are less important in the early years as you open and build your practice. However, pre-paying your loan may become an option after your practice is no longer considered a start-up and is looked upon by lenders as an established practice. However, this will again vary from bank to bank.

The points mentioned above are more or less standard for every dentist irrespective of the country. It is the beauty about money. It always follows the same rules (with slight modifications) everywhere. So, check all the bank regulations at your locations and then apply for a bank loan.

How bank decides whether to provide loan to a dentist or not

…See The Next Slide…

In this article, we are discussing the various ways for a dentist to raise that initial financial fund to start a dental practice. In the last slide, we also examined the points to take care before taking a bank loan.

Dental Practice Management

Almost all of the major banks all over the world provide loans to dentists. They have their ways to assess each loan application.

A dentist applying for a bank loan is usually a first-time loan applicant (looking to start a new practice) or a dentist with few year of professional dental practice under his belt (looking for expansion of his/her existing dental practice). 

There are few points that every bank will consider before approving the loan request for a dentist. Please take a note of these points as they are very crucial. If these points are not in order, then your loan application can be rejected. So read these points very carefully.

  • If you are a first-time applicant for a loan, then you will require a guarantor who can fulfill the criteria laid down by the bank. Banks will decide whether to approve your loan or not after analyzing the reputation of the guarantor.
  • If you are a dentist/doctor with a few years of professional career under your belt, then the bank will assess your loan application based on your credit reputation.

What are the points the bank looks for before approving a loan?

(Please note that these points just covers the necessary options. The final approval or rejection of the loan application depends on all factors considered simultaneously. It also differs from one country to another.)

Need or Greed?

Bank makes an assessment what the real requirement of the loan is?

Need or Greed refers to the intention for which you are applying for the loan. Personal loans are made available for genuine needs like marriage, hospitalization, sound business venture or whether it is taking personal credit for education.

However, if you wish to obtain the amount and invest it in stocks or commodities to generate a higher return by speculating, then it is highly not recommended. So, as a qualified professional (dentist) your need is well justified which is to start your private dental practice.

Credit History: 

In this clause, the bank assesses the credit history or the financial reputation of the

  • Applicant applying for the loan or
  • The guarantor who is supporting you for the investment.

So, if you are new dentist applying for the loan, then the financial reputation of your guarantor matters. If you are a dentist with few years into the profession, with an established dental practice, then your commercial or financial reputation matters.

Financial Reputation: It consists of many points.

  • Financial history – Bank balance available.
  • Nature of profession (to assess stability)
  • Professional qualifications.
  • Age
  • Previous loans status – Pending or cleared.
  • Any additional income source.
  • Individual personal & professional reputation.

So, now you are almost ready to take a bank loan.

However, before that read the 3 final steps of precaution.

Have a complete read of the 3 points that can have a significant impact after you take the bank loans.

Interest rates: Carefully check the interest rates. Also, calculate the EMI that you would need to pay after taking the loan.

Interest Rates & Mortgage: Carefully check the interest rate. Also, assess the Mortgage that you need to furnish. If there is no mortgage, then the interest rate will be usually high.

Penalty Charges: In case you are not able to pay your dues on time, a hefty penalty that is charged on your loan amount. You should find out about the exact details regarding the penalty that may get levied in case of any such circumstance arising in the future. You want to ensure the affordability factor of the loan right from the beginning.

Till this point in the article, we discussed the ways to raise the initial capital to start or expand your dental practice. The topics covered till now apply to every dentist irrespective of the location or country. Therefore, start researching all the bank loan options available at your location and while finalizing a loan amount, consider the points we have discussed in this article. 


In the next 2 slides, we will look at some of the specific bank loans available that are applicable only to the dentists located in India. You can inquire about the possible bank loans which are relevant to your location. 

What Are The Various Loans For a Dentist in India?

(Please note the loans mentioned are from online sources. However, before taking any loan your requested to confirm with the branch of the bank in your city as the loan rules keep changing with time)

(Here we are are mentioning about the loans available to Indian doctors. If you are from outside India, then do enquire in the banking sectors of your country.)

SBI Dental Doctor Plus Bank loan

Simplified and collateral free bank loan from SBI for registered Dentist who has BDS and above qualification. The details of Dental Doctor Plus of SBI is given below

Eligibility for availing SBI Dental Doctor Plus bank loan

  • Individuals / Partnership firms / Ltd. Co / Trust.
  • Promoters should have minimum BDS and should be registered practitioners.

Purpose of Dental Doctor Plus

  • To boost the financing to Dental equipment under tie-up arrangement.
  • To finance qualified dentists
  • For buying equipment
  • Any other activities related to Dental profession

Nature of facility

Term loan

Margin

  • Up to Rs. 25,000 – NIL
  • Over Rs. 25,000 and up to Rs. 5 Lakhs – 10%
  • Over Rs. 5 Lakhs and up to Rs. 10 lakhs – 20%

Tenure of Loan

  • Maximum period of 5 to 10 years with maximum moratorium period of 6 months
  • For construction purposes, the moratorium period is 12 months (can be relaxed up to 24 months at the discretion of an authority one level higher than the sanctioning authority)

Primary security

Hypothecation of assets financed by the Bank

Collateral security

NIL

Loan amount

Maximum of Rs.10 Lakhs.


Check out More Loans Available to Dentists from various banks in the next slide

…See Next Slide…

SBI Dental Doctor Plus Bank Scheme

SBI Doctor Plus Scheme allows a hassle-free financing solution for qualified medical practitioners in any discipline. Although Doctor Plus loan scheme can be opted by all skilled medical practitioners, it is more suitable for freshers who have an entrepreneurial attitude. Here we will find what are the features, eligibility, security, documents required and other things to be considered for availing Doctor Plus Bank Loan offered by State Bank of India.

  • For buying medical equipment (For dentists doctors, the loan also covers dental implants besides material; for orthopedists, the credit also covers various replacements /implants for hip/knee/shoulder/spine, etc.)
  • Setting up a clinic, X-ray lab, nursing home, pathological lab, drug stores, etc.
  • For purchase of vehicles, ambulance, computers, etc.
  • Expansion / renovation / modernisation of existing premises.
  • For marketing exercises, business trips.
  • Any other activities related to the medical profession.

Eligibility for Doctor Plus Finance Scheme

  • Individuals / partnerships / Corporates / Trusts (with powers to borrow)
  • Promoters should be registered practitioners and possess minimum qualification such as MBBS / BAMS / GAMS / BDS / BHMS
  • Key promoters should be qualified doctors.

Loan Amount offered through SBI Doctor Plus

Maximum of Rs. 5 crores of which a subceiling for Working Capital limits at:

  • 10% of total loan amount for up to Rs 1 crore
  • 5% of total loan amount for above Rs 1 crore

Repayment of SBI Loan for Doctors

  • Maximum period up to 7 years
  • Maximum moratorium 12 months, except for construction purpose, for which moratorium can be up to 24 months

Primary Security for SBI Doctor Loan

Hypothecation of Assets financed by the Bank.

Collateral Security for SBI Doctor Loan

No need for tangible collateral security for loan amounts up to Rs 15 lakhs for Allopathic professionals and up to Rs 10 lakhs for other professionals (Homeopathic, Ayurvedic, Unani.)

Above Rs 10/15 lakhs: Tangible *collateral security of at least 25% and Personal guarantee of promoters.

*There is provision for concession on collateral security 

Insurance for SBI Doctor Loan

Insurance of assets purchased out of Bank loan and in respect of vehicles, comprehensive coverage as laid down.

Margin of SBI Doctor Loan

  • Up to Rs 5 lacs: *10%
  • Above Rs 5 lacs: *15%

* There is provision for concession on margin

Interest rates of SBI Doctor Loan

*Interest rate is based on score obtained on simplified credit scoring model

*There is provision for concession on interest rates

Processing Charges for SBI Doctor Loan

0.5% of Loan Amount

Minimum Rs 500; Maximum Rs 50,000

**Sanctioning of loans up to Rs 25 lacs is based on credit scoring model. 50% and above scorers will qualify to avail this facility

***Sanctioning of loans above Rs 25 lacs is based on CRA rating.

Documents required for SBI Doctor Loan

As per SME documentation

Unique features of SBI Doctor Loan

  • Eligibility as per credit scoring model – Minimum score – 50% for limits up to Rs.25 lacs; For above Rs.25 lacs, CRA model is applicable
  • Disbursements can be made in installments over a period of 24 months
  • Half yearly inspection is stipulated


Check out More Loans Available to Dentists from various banks in the next slide

…See Next Slide…

Loans for Dentists From Central Bank Of India

It is exclusively for all dentists who are members of IDA

This loan Scheme for Dentists is known as CENT DENTIST

  • The best part of this scheme is that it has been exclusively made for dentists.
  • It covers all the aspects of dentistry.
  • It takes into consideration if you are a New Dentist or Experienced Professional.
  • It takes into consideration where your practice is located – Urban Areas or Rural.

Purpose

  • Purchase of equipment including a computer for the clinic, setting up of Dental Clinic, clinic-cum-residence, expansion /renovation /modernization of existing practice.
  • Working Capital requirement including stock of medicine /disposables.

Eligibility

  • Applicant/Dentist should be a member of IDA. Original of IDA membership certificate and photocopy to be submitted. Original will be returned after verification.
  • Individuals/Partnership/Companies/Trusts.
  • Applicants / Promoters should have recognized qualification in BDS/MDS, should have completed House Surgeoncy to establish Dental Clinic and should be a registered Dentist.
  • Partnership – Out of total partners at least 50% should be qualified and registered Dentists.
  • Company – At least 50% of the promoter/directors should be qualified and registered Dentists.
  • Trusts – Trusts should be registered with the power to borrow. At least one of the trustees should be qualified and registered Dentist.

Quantum of Loan:

  • New Dentists (within 3 years, including house surgeoncy) in any location Maximum: Maximum Rs.10.00 lakh, inclusive of working capital limit up to a maximum of Rs.1 lakh, if required.
  • Other Dentists:-
  • Rural/Semi Urban areas
Maximum Rs.50.00 lakh, inclusive of working capital (WC) limits up to Rs.5 lakh, if required.
Urban/Metro areas Maximum Rs.200.00 lakh, inclusive of working capital (WC) limits up to maximum of Rs.10 lakh, if required.

Margin

  • 25 % for construction of Dental Clinic/WC.
  • 15 % for purchase of new equipment.

Security

Primary:

  • Hypothecation of assets acquired out of bank finance.
  • EM of property with building owned by the Dentist in case construction of building for clinic/clinic-cum-residence is done in owned property

Collateral

  • Collateral of minimum 50% of loan sanctioned to be provided by the borrower. The loan will not be covered under CGTMSE Scheme

Rate of Interest

  • (a) For new Dentists.

MCLR+ 0.5% (floating)

  • (b) For other Dentists.
Loans upto Rs.100 lakh Loans over Rs.100 lakh
Purchase of equipments, WC MCLR+1.75 % (floating) MCLR+1.75% (floating) on entire loan amount.
Construction of Dental Clinic / Clinic-cum-residence MCLR+2.00 % (floating) MCLR+2.00 % (floating) on entire loan amount

Guarantee

For loans above Rs.100.00 lakh, Personal Guarantee of all the Partners, Promoter Directors, Trustees to be taken in case of Partnership, Limited Company, and Trust account respectively.

Disbursement

Branch can make multiple payments over a period of 12 months from the date of sanction by the requirement. However, the maximum time of loan should not exceed seven years or ten years as applicable/mentioned in Para 11 under Repayment Period parameter.

Repayment Period

  • New Dentists: The maximum repayment period will be maximum 66 months including six months of the moratorium.
  • Other Dentists: In case of purchase of equipment excluding WC, the maximum repayment period is 84 months including moratorium period of 6 months. In case of Loan for construction of Dental Clinic / Clinic-cum-residence, maximum repayment period of loan can be ten years including moratorium period of 12 months.

You can check out the official link for the loan here.


Check out More Loans Available to Dentists from various banks in the next slide

…See Next Slide…

Oriental Bank of Commerce Doctors Loan

SCHEME FOR LOANS TO DOCTORS

Eligibility Qualified registered medical practitioners with minimum qualification BIMS/BAMS/ BUMS/ DHMS/BHMS/ BPT/ MBBS/BDS & above
Constitution of the Borrower Individuals, joint borrowers, proprietorship, partnership and Company (Pvt./Public Ltd.) concerns where the majority of shareholding is by qualified medical practitioners only in case of firms/companies.
Purpose 1. For acquiring premises on ownership basis required for running Clinics/Nursing Homes, subject to compliance with license/registration requirements under laws of State / Central Govt. as the case may be, be ensured.

2.  For purchase of furniture & fixture, furnishing, renovating existing clinics.

3. For purchase of standard make medical equipments, professional tools, computers, UPS, software, library, books

Amount of loan Upto Rs.100.00 Lacs
Type of facility a) Term loan

b) Clean Over Draft limit – Rs. 5.00 lacs (Subject to availability of tangible collateral security equivalent to 200% of the OD loan limit, within the overall composite loan limit ceilings).

Security Prime security

1.Hypothecation of assets to be purchased/acquired with the help of bank’s finance.

2.Equitable mortgage of business premises if financed by the Bank.

Collateral security :

For loans up to Rs.5.00 lac

1. Doctors having qualification of MBBS/BDS and higher professional degree

No collateral security, except one-third party personal guarantee of the person having adequate net worth preferably of a spouse.

2.Doctors having qualification other than the above.

No collateral security, except two third-party personal guarantees of persons having adequate net worth, one guarantee shall be of a spouse.

For loans above Rs.5 lac and upto Rs. 10.00 lacs

Tangible & realizable collateral security equivalent to 50% of the loan amount and one personal guarantee preferably of spouse.

For loans above Rs. 10.00 lacs

Tangible & realizable collateral security equivalent to 75% of the loan amount and one personal guarantee preferably of spouse.

Margin      25%
Rate of Interest Click here to view Rate of Interest.
Penal Interest In case of delayed payment, a penalty of 2% on the overdue amount for the over due period shall be charged.
Process fee/ Upfront fee 0.50% of the total limit sanctioned subject to minimum of Rs.500/- +Service tax, if any.
Repayment Total repayment period -7 years inclusive of maximum moratorium period of 1 year.

Official Link.

HDFC Loan for Professionals (including Dentists)

You will get some exclusive features and benefits with your HDFC Bank Professional Loan

  • In – Principle loan eligibility in 1 Minute online and across all branches
  • Convenience of contacting the bank through SMS, Webchat, Click2Talk, PhoneBanking and at Branches
  • Professional Loan is also available by repayment of home loans, auto loans, and credit cards.
  • Loan Amount up to Rs. 20 Lakhs (Up to Rs. 50 Lakhs in selected locations).
  • Flexible repayment options ranging from 12 – 60 Months.
  • Credit Protect Insurance Plan:
    We help you take care of your loved ones with a Credit Protect Plan to cover your loan at a nominal premium.*In the case of Natural / Accidental Death of the customer, the customer/nominee, can avail of the Payment Protection Insurance (Credit Protect) which ensures the principle outstanding on loan up to a maximum of the loan amount.We will charge a premium for this product, and the premium amount will be deducted from the loan amount at the time of disbursal. We will also charge service tax and applicable surcharge/cess at the rates notified by the government.Secure your business loan with Credit Protect.Key benefits of policy

    • Protects the family by paying off the loan amount in case of death of the customer
    • Life Coverage – provides peace of Mind
    • No need to use other savings to repay the loan
    • Tax Benefits as per applicable laws
    • One convenient package – loan + insurance

* Premium will be charged for Credit Protect will be deducted from the loan amount at the time of disbursal.

(* terms and conditions of the Insurers shall apply, Above product is offered by HDFC Life Ins Co.ltd)

Already have a Professional Loan?

Reduce your EMI, transfer your existing Professional Loan to us. Professional Loan balance transfer offers special and exclusive benefits.

  • Interest rate as low as 12.99* % on existing loan transfer.
  • Processing fees as low as 1.25%

Now reduce your EMI burden with our balance transfer programme.

Apply now for a Professional Loan Balance Transfer.

Eligibility and Documentation of Loans for professionals

Get details on eligibility criteria & documents required for HDFC Bank Loans for professionals

Doctors, Chartered Accountants, Architects and Company Secretaries Professionals involved into Self Practicing or Consultancy.

With:

  • Minimum Experience: 4 years Post Qualification experience for Doctors/ Chartered Accountants & 5 years Post Qualification experience for Company Secretary / Architect.
  • Minimum Annual Income (ITR): Rs. 1 Lakh p.a.
  • Business must be profit making for the last 2 years
  • Age of Applicant: Min 25 years & Max. 65 years at the time of loan maturity.

Documents you will need to submit:

  • Qualification proof of the highest professional degree.
  • PAN Card – For Company /Firm/ individual.
  • Proof of your identity: Copy of Aadhaar Card/Passport/Voters ID card/driving license/Pan Card.
  • Proof of your address: Copy of Aadhaar Card/Passport/Voters ID Card/Driving License.
  • Bank Statement (latest 6 months)
  • Latest ITR along with computation of income, Balance sheet and Profit & Loss a/c for the last 2 years. Financial should be CA Certified/Audited.
  • Proof of continuation (ITR/Trade license /Establishment /Sales Tax certificate)
  • Other Mandatory Documents (Sole Prop. Declaration Or Certified Copy of Partnership Deed, Certified true copy of Memorandum & Articles of Association (certified by Director) & Board resolution (Original)

Official Link.


This concludes the article. We have tried to provide the details on how to choose the correct bank loans for your Dental Career & Dental Practice. 

If you want just to have a look at the various bank loans available to a dentist (based in India), then you can check this article which tabulates all the significant bank loans available to a dentist.





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