Few chiropractors have the financial resources to purchase an existing practice or make a major expansion to their practice. Fairly or not, many lending institutions treat chiropractic business loans differently than loans to other businesses. A recent graduate of chiropractic school generally has much in the way of student debt and little in the way of assets.
Whether you are looking to expand your practice, buy a new location, or purchase an existing chiropractic practice here is what you need to know about chiropractic business loans.
Reasons for Borrowing
The reason for borrowing has an impact on the type of loan you’ll take out and the sources of funding available to you.
In general, the purchase of real estate (whether it’s to buy land or a building) may allow you to borrow more money, but the process can take longer. That’s because the lender will want to use the purchased land or building as collateral, and that means inspections and appraisals of the property.
A chiropractic business loan to purchase an existing practice will also take time.
On the other hand, financing the purchase of digital radiography equipment, cold laser treatment equipment, or an EMG machine to upgrade and modernize your office can be approved and funded in just a few days. Same for purchase of computers and monitors for office use.
In general, the lower the amount borrowed and the lower the risk, the faster you can get your hands on the funding.
Types of Loans
The type of loan you need for your chiropractic business depends on the amount of money you need to access and the length of time you need to use it. The type of loan you need is a key factor in determining where you should apply for financing.
The most common types of chiropractic business loans are long-term loans, short-term loans, and loans to fund the purchase of equipment.
Long-term financing
This is the most difficult financing to obtain but they also carry some of the lowest rates. These loans can be for 10 years or more. They are used to purchase land, buildings, or even the acquisition of an existing chiropractic practice.
Expect the paperwork and length of time for the approval to be the longest for this type of loan.
Short-term financing
Short-term loans are generally used as a means to help you through a cash flow crunch. The term of the loan is usually one year or less and the interest rates are higher than the rate on a long-term loan.
Use short-term financing to help when cash is short but payroll and other expenses are due. Often, a short-term loan can be set up as a line of credit that’s accessed when necessary. Before using short-term financing, consider how long you will need the money and compare the rate to your lowest credit card cash advance rate.
Equipment purchases
Equipment loans are made for the express purpose of purchasing equipment. Often your medical equipment dealer will offer to finance directly or help you arrange for financing with a lender with which they already have a business relationship.
These loans use the purchased equipment as collateral and can offer lower interest rates than other short-term financing options.
Sources of Financing
Depending on the amount of money you need to borrow, you may turn to several sources for a business loan.
It’s important to remember that Small Business Association (SBA) loans aren’t issued by the SBA. The loan is made by the bank or credit union and the SBA guarantees a portion of the loan. This generally results in a lower interest rate on the loan. However, the SBA sets limits on the amount you can borrow and the amount the SBA will guarantee.
Local bank/community bank
The best source of financing for your chiropractic business loan may be your local community bank. These smaller, independent banks focus on lending in their community. It helps if you have already established a relationship with the bank with either a business checking or payroll checking account.
Commercial banks
These banks are large, nationwide banks. When borrowing here, be prepared for the tightest lending standards and the highest rates. You’ll probably also encounter the most red tape.
Online lenders
Many online business lenders have popped up over the years. If you need a quick loan for a small amount of money, this might be your best option.
If you are an established chiropractic business, you may find you can get a loan in just a few days at most. You’ll also find the highest interest rates.
Preparing to Apply for a Chiropractic Business Loan
Before you head off to the local community bank or credit union or start that online application, there are a few things you’ll want to do to prepare.
Brush off your chiropractic practice business plan. Unless you are applying for equipment financing or a short-term, online loan, the lender will want to take a look at your business plan. Use the loan application process as an impetus to update your business plan.
Pull together industry information. The lender will want to know what’s happening in the industry. By having this information at your fingertips, you’ll be prepared to answer any questions.
Update your financial statements. If you only prepare quarterly financial statements, you’ll want to create an interim quarter-to-date set of financial statements.
File any outstanding taxes. When applying for long-term loans or loans from commercial or local banks, the lender will want to see a copy of your most recent tax returns as a means of verifying your financial statements.
Growing Your Chiropractic Business
Not all business expansions require a large capital investment. If you would like to know how to grow your chiropractic business by growing your cash flow, schedule a consultation with Nutri-West of New York.