Stay away from any other financing sources that offer a deal that is ‘too good to be true’
If you haven’t read Part I of this two-part series, we suggest that you read it first here. David W. Lask, DC and owner of Ask Dr. Lask Wellness Center in St. Louis, Mo., took time to answer our questions on practice financing and other financing sources. What follows is our interview edited for length and clarity.
How can DCs determine whether to lease or buy their offices?
Every situation is different, but initially most practitioners are going to be leasing their space. Typically, when you’re starting your own practice, it will be tough enough to get the money together for all of the medical equipment and supplies you will need to make a go of it. Real estate has gotten so expensive lately that it will probably be unlikely to initially buy the building and land for a clinic.
If the situation is that you are buying an existing practice, and it is already in a free-standing clinic, then you must evaluate the practice separate from the real estate. Evaluate both assets independent of each other. When you blindly combine the two, you will tend to overpay on one of them.
My recommendation is to start small in regards to buying equipment. Initially, only purchase what you will absolutely need to practice the way you want to. Do you really need that $20,000 laser? Digital X-ray equipment? A fancy adjusting table?
Determine what you absolutely must have. What is a non-negotiable in terms of the equipment and supplies you will need to get the practice off the ground? Down the road, as your cash flow stabilizes, you can add that laser, etc. In the meantime, farm out the X-rays and imaging. Delegate and/or hire a billing service.
What should chiropractors absolutely not do?
Number one — do not take your business proposal to only one bank. Get a few different “bids” on your business proposal with other financing sources. Compare the local bank, the credit union, and the larger national bank for rates and service.
Read the fine print in the financing packages. Are there pre-payment penalties? What does the rate do if I’m late on a payment? Do they penalize you for being late multiple times on payments? What are some of the other fees involved in the loan?
Also, absolutely do not finance your clinic on credit cards. I knew a gentleman who did this, and it turned into a nightmare of trying to consistently pay them all without being late and then rolling them over onto new credit cards once the initial “deal” was over.
What are some red flags that chiropractors should be aware of when they’re trying to finds other financing sources?
Don’t use some fly-by-night company that you have never heard of for your financing. Use a reputable company that is well established and has a solid reputation. Check the reviews online for the various companies you are considering. Check with the Better Business Bureau and also the local chamber to get insight into local banks and credit unions. Stay away from any other financing sources that offer a deal that is “too good to be true.”
Typically, you are going to pay a higher rate on the money for the higher risk you are to the lender. Also, if you are going to have investors involved, then hire a qualified business attorney to review the contract and all provisions of the financing.
Anything other advice?
The main philosophy I was always taught in regard to opening your own chiropractic clinic was to “keep the overhead low.” Start small with a low overhead. Find a space that is big enough for you to do your thing, and then as the practice grows, then you go out and get that bigger space, or buy a building or add some more expensive equipment.
When you keep the overhead low, you don’t have to see a hundred patients a day to make a great living and will be helping people to stay healthy.
The stress of business ownership is real, so don’t stress yourself out by loading yourself up with unnecessary debt on equipment you don’t really need and space that you may not need until later when the practice grows. Get out there and build those relationships with bankers in the community. Get involved in your local chamber and networking groups. You’ll be amazed at how many people are going to want to lend you money for your dream clinic.
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