Friday, February 5, 2016
It takes money to grow a dental practice. If you’re a dentist who’s ready to expand, you might need to purchase new equipment, hire additional employees, increase marketing, or refinance high interest debt. Cash flow is vital to any small business owner and additional funds can make a big difference.
Before you seek a loan, take these five steps to increase your odds of securing affordable funding, like a Small Business Administration, or SBA, loan.
1. Understand the differences between types of funding. You have several choices when it comes to funding your dental practice. Investigate each one before you decide on a loan product or look for a lender.
SBA loans, peer-to-peer lenders, cash advance lenders and credit cards are some of the more popular options available to finance a small business. Keep in mind the most popular might be the most expensive. Typically, SBA loans have the lowest rates, longest terms and subsequently result in the lowest monthly payments.
2. Use credit wisely and maintain a high credit score. Both business and personal credit scores are important to lenders. Credit scores show how well you handle your finances and the finances of your business. They also predict repayment ability. A low score can decrease the chances that you’ll be offered a loan.
In addition to risk assessment, credit scores also are important when looking at loan costs. You typically need a high score to secure the best-priced loans. We recommend small business owners avoid mixing personal credit and business credit histories. Combining the two can lower your personal credit score. Additionally, using personal information instead of business information usually means your small business will not establish a strong business credit history.
3. Get your business records in order. When you apply for a loan, you’ll be asked to produce a number of documents including bank statements, personal and business tax returns, lease agreements, list of business assets and more. Leveraging technology can save you a lot of time and stress. Consider using a cloud-based accounting system like Xero or Quickbooks Online, for example. This type of online software for small businesses can manage invoicing, bank reconciliation, bookkeeping and more. Many of these systems offer a free trial. Try before you buy to find the best fit for your needs.
4. Seek advice from mentors. Although not specifically finance related, working with a mentor can help you grow your practice. There are several ways you can find a mentor. Check with the dental society in your area or your dental school for mentorship programs.
You also can seek out one of the government-sponsored mentor organizations like your local Small Business Development Center or SCORE office. There are online solutions like ‘Ask an Advisor’ run by Nerd Wallet, which features expert advisors who specialize in various fields and are available for free consultation online.
5. Look at an SBA loan first. Small Business Administration loans have some of the lowest interest rates, longest terms and lowest monthly payments in the marketplace. If you can secure an SBA loan quickly from an online provider like SmartBiz, this may be the best option. SBA loans can be used for a wide variety of reasons including working capital and consolidating high-interest debt.
Don’t borrow in a way that can end up backfiring or keeping your practice from fully benefiting from additional funds. The more you know before going into the application process, the better the chances you’ll get affordable funding without a lengthy process.