Welcome to the Planning for Practice Success Newsletter

Practice Startup Success

Information Advice Encouragement

March 17, 2008                                                                                  ISSN 1934-3248

 I'm not happy, I'm cheerful. There's a difference. A happy woman has no cares at all. A cheerful woman has cares but has learned how to deal with them.

-- Beverly Sills (1929-) American Opera Singer 

In this issue:

 Do you have a Startup Story to tell?  Some of you may know I do “startup stories” for Chiropractic Economics. If you are in the process of starting up, or you have actually started your practice, let me know. I will do a short interview with you and write up the story for your review. Then you send in a photo, and you’re on your way to your “15 minutes of fame!” Seriously, these stories are a great way to give other DC’s help and encouragement with their own startups. Email me at jean@dcpracticesuccess.com and let me know you are interested. 

Collateral vs. Injection: Here is the Difference. I recently asked an SBA loan expert to explain the difference between “collateral” and “injection.” Here is what he said (with my explanations):

1. Injection is the borrower's personal ownership in the business at startup.
2. Collateral is pledged assets the lender may convert to cash to pay off the loan if the borrower defaults.

 Banks have differing policies on the injection issue. Since chiropractic is a profession, many bankers consider them a much more stable business in the long term. Actually, it is historically more commonly seen among physicians and dentists. However, since more health insurance companies have recently been accepting chiropractic visits as "covered charges" banks are starting to take notice. I always recommend startup businesses invest as much of their own financial resources as possible to keep their loan amount low and more affordable. SBA says all startups must have at least some injection in equipment, inventory or cash. I suggest a minimum of 90% loan to value, meaning the most creditworthy applicants should be prepared to inject at least 10%.

Collateral is a different matter. Most small loans (up to $50,000) do not require collateralization outside of normal business assets. The SBA requires the lender to take all available collateral if the loan is under-collateralized (“under-collateralized” means there are not enough assets, in the opinion of the bank). This may include the personal residence of the business owner if he/she has equity in the residence and is personally guaranteeing the loan to the professional corporation.

Still confused?  Ask me a question so I know what is confusing. 

U.S. Business Law/Taxes at About.Com. I have a new “gig” – I’ve been hired as a Guide for About.com, writing about business law and taxes in the U.S. I am putting lots of information on the site, about starting into business, legal forms of business, employment law, tax deductions, copyright/patent/trademark, and more. Check the site at http://biztaxlaw.about.com/ -In particular, you can find information about local and state laws. 

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