We’ve all heard the phrase, “it takes money to make money.” That’s as true for dentists as it is for any other type of business. If your dental practice is relatively young, you may not have the money you need to meet your growth plans. If your practice is well-established and nicely profitable, you still may not have enough cash reserves to handle current needs. Small business loans are the go-to resource when you need working capital.
THINGS TO CONSIDER
Why do you need money now?
- Upgrade your dental office or equipment
- Buy or build a new clinic
- Open a second location
- Purchase an existing practice
- Bring on more staff
- Build up cash reserves
- Pay your bills during a slow period
- Handle unforeseen repairs
- Purchase supplies for a peak period such as back-to-school
- Launch a new marketing campaign
How much money do you need to make this happen? And when do you need it? Applying for a traditional business loan takes time. But there are several much faster ways to get the working capital you need.
Shop around and do the math before you make any decisions. Interest rate isn’t the only cost when it comes to small business loans. You may have other actual costs such as application fees, special charges, or pre-payment penalties that may affect your practice later on. And there are functional costs such as the repayment terms. If you can’t comfortably make the payments, that will create or worsen cash flow problems. If you need to borrow for something else before this loan is repaid, that may limit your options.
Learn what types of small business loans are available today. You have far more options than traditional commercial bank or SBA-backed loans.
WHERE TO LOOK FOR SMALL BUSINESS LOANS
This depends on the considerations I mentioned above. How much money you need. What you need it for. And how fast you need it.
A bank may be your best bet. Especially if you need a lot of money. Say, to purchase real estate or enough dental equipment to outfit a second location. But don’t assume that your regular business bank is the right lender for you, this time. They may offer a wide variety of products and services for dental practices. But that doesn’t mean you’ll get the best deal possible.
Consider other types of secured or unsecured dental practice financing:
- Short term business loans. These can be useful if you need a larger sum quickly. You’ll have fixed payments. And around six to 12 months to repay.
- Business line of credit. Banks and alternative lenders offer these revolving credit programs. You can borrow up to the assigned limit, whenever you need the money. Repayment terms are flexible. As you repay, the amount available to you grows.
- Business credit cards. Small business owners rely on cards to make everyday purchases and handle emergencies. Your practice may have multiple cards. Don’t run up the balances to the point where you cannot pay them off quickly.
- Accounts receivable factoring. You sell your current receivables to a third party. You get most of the money up front, then you get the rest (minus a percentage fee) once the lender collects from your accounts. Not only do you get cash quickly, you can save time and hassle associated with collections.
- Merchant cash advance. With this, you “sell” future credit card income instead of current receivables.
Credit History is Also a Factor
Where to look for small business loans also depends on your credit history. Traditional loans require excellent credit. Even loans backed by the SBA require good credit. But what if your practice has had past problems? Fortunately, you can still get some types of business loans even with bad credit. You’ll pay more in interest or a higher discount rate. But you can get the money you need to sustain your practice today. And you can use this business loan to help boost your future credit score.
PREPARE YOUR PRACTICE
Find out what lenders want and expect when you apply for a dental practice loan. Dental Metrics advises that “there are ways to increase (or decrease) your chances of being approved for dental business loans that can be done even before you start looking.”
Make credit-building part of your business plan. Pay your bills on time. Don’t go into debt without a good reason. And never borrow more than you need. Lenders like dentists as clients, so they may offer to loan you extra. Don’t do it. You’ll have bigger payments. You’ll waste money paying more interest. And racking up debt can lower your practices’ credit score.
If your business credit isn’t as healthy as you’d like, make a plan to fix it. That’s the single-best way to improve your options when you shop for small business loans.
DEVELOP A LONG-TERM RELATIONSHIP
With a business bank – even if they may not be your first-choice lender for every type of need. Like shopping for small business loans, there are certain factors you should consider to choose a bank.
At some point you might want a traditional bank loan – so pick a business bank that may be more accommodating when that time comes. One that is well familiar with the dental industry.
With United Capital Source – here at UCS, customer service is our #1 goal. It’s not a marketing slogan. Or a side-benefit. It’s our business philosophy. Your long-term success is more important to us than any one-time financing deal. To us, the right small business loan is the one that’s in your best interest.
I know that’s not the usual approach, but it’s what makes UCS so different. You’ll find our lending experts are approachable. And knowledgeable. And genuinely interested in understanding the business details of your practice. That’s how we provide the one-on-one guidance we promise. It’s why you should start with us when it’s time to shop for small business loans.