You have alternatives available if the banks turn you down.
Every business needs capital to grow; whether to buy new equipment, reach new customers, or open a new location. Chiropractic practices have all of these needs, but they also have unique qualities that may make them a difficult fit for traditional forms of funding through banks and credit unions. Fortunately, the rapidly growing alternative finance industry may be more in alignment with a chiropractor’s needs.
Many DCs who are looking to grow their practices are young and have student debt outstanding. Neither of those make for a good credit rating, which is a key factor banks and credit unions weigh when deciding whether to extend funding. Traditional lenders also prefer businesses that have been in operation for at least two years.
Because of their high overhead costs, banks also prefer to handle large loans (those above $100,000), which is typically much more than the average chiropractic practice will need. Bankers also commonly require collateral to be pledged in return for a lower rate on their lending, and young chiropractors may not yet have a mortgage that they can put up.
Alternative financing can address these types of situations and more.
First, consider your credit rating. While a good credit rating is central to a bank’s lending decision, it is much less of a concern to an alternative finance company. These funders use proprietary technology to quickly gather and analyze different kinds of data on their clients; a credit rating is just one factor among many. Having large amounts of data means alternative funders can see, for example, that although you have student loans outstanding, you are paying them back consistently and on time.
The kinds of equipment needed to expand a chiropractic practice normally cost less than that required by other healthcare professions. If you need help acquiring it, however, many alternative finance companies can structure assistance for both buying and leasing.
For example: The implementation of ICD-10 coding requirements created additional expenses that all practices must incur in order to comply with the mandatory software—and financing can play a role in compliance. Other expenses stemming from the change include hardware upgrades, education and training costs, changes to printed materials, and loss of productivity.
Then there’s marketing. Unlike a medical doctor or dentist, many chiropractors cannot count on insurance plan referrals to keep a steady stream of patients coming through their doors.
Chiropractors need to spend heavily on marketing—$25,000 annually isn’t uncommon for a young practice.
Alternative financing is well-suited to fund a marketing campaign. Many alternative finance companies specialize in short-term funding; that is, funding that a business will repay in two years or less.
With short-term funding, you can also purchase the postcards and flyers you need to market your practice, and repay the funding as soon as new customers start coming through the door. More experienced alternative funding companies are also now offering lines of credit. You can draw on this working capital as needed, meaning that you don’t need to spend the full amount for which you have been approved.
In addition, an alternative finance company can make a decision in minutes and get funds to your bank in days. If a marketing opportunity pops up, like a major local wellness fair, you can seize it and get in front of new prospects, rather than wait the weeks or months required for a bank decision.
An alternative finance company may also offer a broader range of funding options than your bank or credit union. This can range from short-term funding for paying a contractor or buying or leasing equipment, to long- term loans guaranteed by the U.S. Small Business Administration (SBA) to buy a business location or even to finance a franchise.
Franchising is small now in chiropractic compared with food service or auto care, but as that option expands, entrepreneurial chiropractors may find that they need partners with experience in that kind of funding. According to FRANdata Information Services, traditional banks aren’t meeting all of the franchise industry’s needs: In 2014, bank lending fell $1.4 billion short of what franchise operators needed.
Alternative financing can meet the needs of chiropractic practices in one other important way, too: It requires far less paperwork than traditional bank funding. While it’s always a good idea to write—and regularly review—a business plan, you won’t need to submit one to get most kinds of alternative financing nor will you need to produce your résumé and details on other funding you have sought.
For solo practices and small offices, a streamlined source of funding can leave you with more time to see and treat patients, which is what you really need to grow your business.
Stephen Sheinbaum is the founder of Bizfi, a financial technology company combining aggregation, funding, and a participation marketplace on a single platform for small businesses. Founded in 2005, Bizfi has originated loans to thousands of small businesses around the United States, including $1.5 million for chiropractic offices. He can be contacted through bizfi.com.
