Securing the right financing for growing your practice can simplify your path to success.

By Mitch Jacobs

As a chiropractor who owns a practice, you know how important it is to take advantage of opportunities that come your way. Expanding your practice, buying new tables, or investing in new software are all ways to heighten the patient experience and increase retention rates.

There are also those times when your main table breaks or the plumbing goes haywire and your business is severely impacted overnight. Whether your business finds itself facing a great opportunity or an unfortunate obstacle, having cash on hand to remedy the situation is essential to keeping your business moving forward.

Owning your own practice is a full- time, 24-hour-a-day job. Treating patients, managing a staff, and spearheading important equipment purchases are all in a day’s work. While these tasks fall squarely in your bailiwick, understanding the small business lending landscape requires a different skill set.

Simply put, you’re busy, and taking on the additional task of securing financing can seem daunting. And, according to the July 2011 issue of Chiropractic Economics, within the industry getting financing is far more difficult than it used to be.

So, how do you go about accessing financing to take advantage of opportunities and handle unexpected situations? Armed with the right knowledge, getting the loan you need to take your practice to the next level of growth can be relatively hassle-free. The following tips are a guide into the world of small businesses loans.

Knowledge is power

If you don’t know what you are looking for, the search for financing can be a time-consuming process. Understanding where you stand credit-wise (both for your business and personally) and what your borrowing options are can put you ahead of the game.

For example: Many business owners aren’t aware that a bank won’t typically make a loan if your personal credit score isn’t above a certain threshold (roughly 680). But, you aren’t completely disqualified from all forms of financing should you not meet that criteria. There are other options available to you — keep reading to see what might work best for your particular needs.

Bank financing: If you’re looking to take on a full end-to-end renovation, such as the opening of another location in a neighboring town, then a traditional long-term loan is a good fit. In addition to assembling the items below, the approval process for a traditional bank loan takes a significant amount of time.

1. Complete financial records (balance sheet, cash flow income statement),
2. Business plan and pro forma financial statements,
3. Complete household and business tax

forms dating back two to three years,
1. Consistent positive cash flow and other necessary diligence,
2. And, finally, time — long-term loans often take several months to approve (and it can take time to gather the needed information).

For example: bank loans and Small Business Administration (SBA) loans.

Short-term small business loans: These are real loans, not merchant cash advances, that enable you to extend payments over six to 18 months at total costs similar to long-term financing.

These loans are for shorter-term needs that you don’t want to be paying off for years, for such activities as launching a marketing campaign, hiring a new employee, or buying inventory. Amounts can range from $5,000 to $150,000. These loans can typically be funded in as soon as seven business days. The benefits are threefold:

1. They are based on your business performance and not just your personal credit score,
2. The information required is usually readily available from your electronic records (bank account, credit card transactions, taxes, etc.), and
3. The term is designed to allow you to spread out the payment, but also have it paid down before your next opportunity surfaces (you don’t want debt stacking up on your business).

For example: small-business private lenders, factoring, SBA loans.

Personal credit and assets: Using a line of credit or a personal credit card is fast and easy. The major considerations:

1. If you’ve already drawn on your personal credit to build up your practice, your credit score may have been affected (this is not a reflection of you as a business owner, but rather of the credit-scoring system), and
2. Loan programs based on personal credit are designed for household use. So, while you may require $20,000 to upgrade your computer system and hire a new employee, you might only have a $5,000 credit card limit. You can borrow against your home, but, that is a difficult and time-consuming option that poses potential risk to your household.

For example: credit cards, home equity line of credit (HELOC) loans.

When tackling your next project — or unexpected situation — always remember that when it comes to financing, preparation is half the battle. Knowing exactly where you stand credit-wise, as well as what your financing options are, will help your practice through its next growth phase.

Mitch Jacobs is the founder and CEO of On Deck, a leading small business lending technology platform. On Deck evaluates the creditworthiness of small businesses and provides them with access to capital. Jacobs received the Ernst & Young Entrepreneur Of The Year 2010 Award in the Emerging Business Category for the New York Metro area. He can be reached through ondeckcapital.com.