Issue 9 - July2004

How to talk to your banker… and get the money you need
By Stanley Greenfield, RHU

Miss Piggy had the best statement when it comes to banks. She said you have to be careful dealing with any institution that feels that it must put a chain on its ballpoint pens in the lobby!

This is a good rule to remember before you walk in the front door of your bank. As a new doctor, it is a frightening experience to make that first trip into those hallowed halls with hat in hand, seeking something that banks hate to let go of — money!

There you are, walking in asking for money and you have assets consisting of a car trunk full of chiropractic books, a plastic spine and a few outstanding student loans of more than $100,000. Based on that, the bank probably won’t even validate your parking ticket to get out of their lot!

So what is a new doctor to do? Don’t panic. You have solutions to your financial problem.

The bank is not your only choice; you have several others. Before you visit the banker, you need to gather information on your other options, which include:

• Small Business Administration. Find out what the Small Business Association will and will not do for you. You can get more information on their capabilities by contacting the Small Business Development Association in your city. Most cities have these offices and they can be a great resource for all types of information on financing and setting up a practice.

• Student loans. If you are still a student, I have some additional advice for you that you won’t hear from the financial office on campus. If you are not maxing out your student loans, then I suggest you do so now. This student loan money is the cheapest money you will ever “buy,” at the best terms you can get. You will not be eligible for any more once you graduate.

• Credit cards. Getting out of credit-card debt is sound advice. But for a recent graduate who wants to establish his or her first office, credit cards can provide financing.

You can now get a card with a fixed rate of below 10 percent — a bargain rate. And, you can make minimum payments and run the loan as long as you want.

As a new practitioner, you need that flexibility. Look at the cards you currently have and call the companies on their toll-free number. Ask how to lower your interest and increase your credit limit. You need to have cards with a total limit of at least $20,000. These cards act like a line of credit.

• Equipment companies. Have you checked to see what the equipment companies and the leasing companies will do for you? Get the information. Banks become competitive when they know you are aware of other financing options. You will let them know this from the beginning — as long as you have the information before you call on them.

• Relatives. Some relatives may be willing to finance you. A word of caution: You may encounter “other” people who would be happy to set you up in practice, but they essentially ask for a piece of your practice. Examine the terms of any of these deals very carefully before signing.

MEET THE ‘ENEMY’
Once you have done your homework, you are ready to meet the “enemy.” Here are some things to keep in mind:

• Develop a business plan. You need to have a business plan and a marketing plan ready to show them. Bankers will ask for one and should be impressed that you came in prepared. Bankers want to know how you are going to use the money and if it is for a piece of equipment, you need to show them that this equipment will generate income to the practice.

• Get a referral. I would also suggest that you get a referral to a banker and not just walk in from the street. If possible you also want to talk to a bank who has a chiropractor as a customer: He or she already knows what a chiropractor does to make money. It’s tough to talk to a banker who still doesn’t consider you a “real doctor”!

You also need to talk with the person who will be part of the decision-making panel that grants loans. If your credit has seen better days, be honest with the banker. Bankers hate surprises.

• Cover the 5 ‘Cs’. Most banks make loans based on the “five “Cs” of credit”.

1. Collateral. Do you have any, or do you have someone else who does have it and is willing to co-sign?

2. Capital. How much cash do you have?

3. Cash flow. Bankers want to see a business plan with a one and three-year cash flow for your practice.

4. Conditions. Are the conditions good where you are going to locate your practice? This should be covered in your business plan.

5. Character. Banks are just as interested in your character just as they are interested in your credit rating and score.

So to sum up:

• Do your homework and check out what choices you have when it comes to money.

• Develop a good business plan and marketing plan.

• Get a referral to a banker. A bank with experience with a successful chiropractor is a plus.

• Like the Scout motto, be prepared.

• Understand the 5 Cs of credit.

And remember: Everything is negotiable. u

Stanley Greenfield is a registered financial consultant and a registered professional disability and health insurance underwriter (RHU). He is president of Greenfield’s Financial Power Program and offers financial and practice management to the chiropractic community. He can be reached at 800-585-1555.