Small Business Loans for Chiropractors
You can expect to spend at least $100,000 during the first year of your chiropractic business. Fortunately, the U.S. Small Business Administration and several private lenders offer small business loans for chiropractors to help.
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Owning a chiropractic business in this $16 billion per year industry can be lucrative, but securing financing may present a challenge.
For most chiropractors, treating patients is their primary goal. But when it comes to opening a business, they must consider a slew of other factors in finance and marketing.
Some professional chiropractors estimate the average first-year costs to be at least $100,000, with many businesses exceeding that amount when necessities like equipment and marketing expenses are factored in.
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Small Business Loans for Chiropractors
For a small business loan, first analyze what you need and determine what type of lending option works best to cover that need. Typically, borrowers should consider the following small business loans for chiropractors.
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SBA 7(a) Loans
The Small Business Administration (SBA) offers a variety of lending opportunities for small business owners. Consider this option first.
Loan terms and rates vary based on the type of loan. But on average, loans are available for up to $5 million dollars, with a maximum SBA guarantee of 85 percent for loans up to $150,000 and 75 percent for loans greater than that.
Each lender that finances an SBA loan will determine the final loan rate, but SBA puts a cap on loans that require lenders to keep the rates within the SBA-approved range. Loan rates also vary based on the total amount and repayment period.
For a complete list of lone types, turnaround time, eligibility requirements, and other details, visit the SBA website.
Small Business Loans from Alternative Lenders
Though similar in function to SBA loans, alternative loans are not fulfilled by banks or credit unions. Instead, they are funded by finance companies, often those that specialize in lending. Typically, they come with high rates. National Funding, for example, offers a working capital loan at a rate of 15% to 30%. However, this is an attractive option to fund loan requests quickly and with less stringent qualifications.
Loans from alternative lenders may be a good option for those who were not approved by traditional lenders, have poor credit, or do not have access to collateral.
Lines of Credit
Though not considered a “loan” in the practical sense, lines of credit do provide a funding option that can be used to finance a variety of expenses like payroll over several years.
A business line of credit is considered revolving debt and operates similarly to a business credit card. Borrowers will have a borrowing limit, set by the lender, and will be able to draw from that amount as needed. Interest is paid on what is borrowed, and borrowers can repay and draw against the loan for the duration of the draw period.
Though business lines of credit are available from a variety of traditional and alternative lenders, consider a lending company that specializes in medical business lending, such as MedTrust and ProMed.
Common Costs for Chiropractors
The first cost to consider is office space or the home of your business. The exact cost for an office location can vary significantly based on the region. For example, office space in a large metropolitan area will be more expensive than a small town.
You’ll also need to need to account for additional operational expenses. This includes personnel expenses to staff the office, office equipment, such as computers and medical record software, permits and licenses required by the state and federal government, and insurance and credentialing fees. When all is said and done, this can tack on $20,000 to $40,000 or more.
These expenses are a considerable investment, often requiring the use of additional finances through a bank or alternative lender, which can be challenging.
Challenges of Getting Financing for a Chiropractic Business
Unfortunately, many traditional lenders view chiropractors as high-risk customers as they usually have large school debt and/or insufficient collateral to back the loan. Lenders may balk at the high cost of opening a practice. And not all lenders recognize chiropractic business the way they do other medical practices.
To help secure a loan, chiropractors should establish a business plan that convinces the lender that there is adequate potential for patient acquisition or a market for the services. Come armed with knowledge and research.
Despite the difficulties that many chiropractors face when securing finances, there are options available. SBA loans offer a more traditional route towards financing, while others options, like alternative loans and business lines of credit, may help those who need the money quickly or can’t meet traditional lending qualifications. Before seeking out a loan, evaluate your needs.
Author: Jeff Gitlen