Does your reception area need a facelift, your computer systems require upgrading, your practice need new equipment, or is it time to expand? Are you experiencing delayed income due to slow insurance payments? Perhaps a large payroll or tax obligation is coming due.
With many options for business funding, where do you begin? There are a number of ways to identify the right business loan for your dental practice. Focus on these key areas when comparison shopping:
Family and friends—Often, the first place business owners turn for extra cash is a family member or a personal acquaintance.
Pros: Chances are that Uncle Rich will be more patient and forgiving than other sources.
Cons: If you fail to put terms in writing from the onset, you may run into significant problems. Protect both parties by including information about the process, such as when and how payments are made, whether it is a secured loan or a partnership, and more.
Angel investor—You might be considering angel investors to finance your practice needs. Basically, you’re deciding between debt vs. equity.
Pros: Selecting a leader within your specific industry who can provide important connections may move your practice forward.
Cons: When you give up a portion of ownership to financial backers, you lose some independence. Can you afford to lose decision-making control? Think about the possible trade-offs you’ll have to make, such as their expectations for a high rate of return (usually between 25% and 33%).1
Personal savings, credit or business credit cards—Sometimes a short-term need for cash can be solved by using your personal savings or credit.
Pros: Many cards come with incentives such as rewards or bonuses. Plus, your business may even have protections on your purchases.
Cons: Be aware that intermingling business and personal finances could impact your debt-to-income (DTI) ratio. You don’t want business debt to lower your personal credit score. Also, there’s the obvious hazard to your security if things take a turn for the worse.
Bank loans—Most small business owners have an existing banking relationship.
Pros: Perhaps the bank has already provided you with a business line of credit. Get your paperwork together, including the last three years of business and personal tax returns and revenue projections. You’ll have greater success qualifying if you come across as a professional.
Cons: Banks approved only 21% of small business loan applications in 2015.2 Have a good idea about the state of your personal and business finances before applying for a traditional bank loan. You want to determine how much money you’ll need and what you’re willing to use for collateral. Also, be patient. Most bank financing takes four weeks or longer. Your bank may place restrictions on the use of the money, so make sure you communicate how you plan to use the funds early on.
Modern lenders—Alternative financing providers, such as Reliant Funding, deliver access to working capital with a quick and easy application process.
Pros: Qualifications are based on your business’ recent revenues. You receive the funds quickly, in days, not weeks or months. You may see a faster return on investment than you would with other funding methods due to the speed and flexibility. You still own 100% of your business (or whatever percentage you had to start) and maintain total control on how the money is spent. Plus, no collateral is required.
Cons: This form of alternative financing typically might not permit terms beyond 18 months, and loans begin at $5,000. If you need longer terms or smaller amounts of cash, you should select another source for funding. You also won’t qualify if you haven’t been in business for at least six months.
Try thinking of your financing needs in terms of a relationship and not as a single transaction. Try to talk with a real person, not a computer, because you’re developing a relationship that you can build upon.
Donna Barrack is a marketing professional in the finance industry. She conducts market research and produces informational content as a resource for business owners. Reliant Funding provides customized, short-term working capital to small and mid-sized businesses. It’s recognized by INC Magazine among the 500 fastest growing companies in America, a result of its high approval rates and first class customer service. For more information, visit ReliantFunding.com.
References
1. https://en.wikipedia.org/wiki/Angel_investor
2. www.sba.gov
