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Practice Startup Success

Information Advice Encouragement

April 14, 2008                                                                         ISSN 1934-3248

 You might as well fall flat on your face as lean over too far backwards.  – James Thurber, American Humorist

In this issue:

Why are Bankers Skeptical about Chiropractors?  I talked recently with a new grad who was going from bank to bank getting rejected.  The bankers said they loved his business plan (of course!) but he had too much student loan debt.  I got to thinking about that and wondered if they would ask a recent medical school or dental school grad the same question.  I think not. 

Bankers are skeptical about loaning money to chiropractors because they don’t understand chiropractic and they are worried that you won’t make enough money to pay them back.  Remember, the most important thing the banker is worried about is getting the loan paid off.  If they don’t think you’ll be able to pay it off, they won’t make the loan.  So… you need to educate the banker about the personal income and business revenue from chiropractic.  The best way to do that is to cite Chiropractic Economics annual Salary and Expense survey.  Check my StudentDC blog for more information. 

Tomorrow is April 15 – Have you filed your business taxes?  If you are still finalizing your business and personal tax returns, take a minute to review my About.com (U.S. Business Law and Taxes) site for a last-minute checklist.  The article includes a list of common mistakes that the IRS says many people make.  CHECK and DOUBLE-CHECK!

Financing Your Startup with Credit Cards.  A grad emailed me the other day and said she is having difficulty getting bank financing and she wondered if she should finance her startup with credit cards.  My answer would be, “Only as a last resort and keep it to a minimum.”  Here is what I’d suggest:

§         Get vendor financing for big items like tables and x-ray equipment.  This financing is more expensive in terms of interest rates, but it will keep you from having to put this stuff on the credit card.

§         Try to get a 0% introductory rate card with the lowest post-introductory rate.  Make sure the 0% also applies to ATM withdrawals.  Then WATCH to see when the intro rate stops and try to pay off the card before this happens.  Pay this card off FIRST if possible.

§         Go minimal, and I mean MINIMAL.  Buy only what you absolutely need.  Don’t get carried away with sales.  Have someone go with you when you are buying, if you have trouble with this.  You must keep your credit card balance as low as possible. 

§         Look for used equipment and furniture.  If possible, use your credit card for this stuff.  You may have to use the ATM if it’s a direct purchase from an individual; that’s why you need the 0% on the ATM withdrawals too.

§         After you start, use the card for working capital.  Work out a bill payment schedule.  Pay the rent and utilities first.  And be sure to pay the minimum on the credit card each month.

§         Live simply.  Take out as little as possible for living expenses.  You did it for three plus years while you were in school; you can do it for a little longer.

§         Show positive cash flow as soon as possible.  Work to get to a position where you are consistently bringing in more in income than you are paying, every single month. 

After six months or a year, re-work your cash flow statement and take it to the bank to show them that you are consistently bringing in more money than you’re spending.  See if you can get them to give you a loan before your 0% introductory rate stops. 

If you can discipline yourself in the short term with this method, you’ll be in great shape in the long term, because you won’t have a huge amount of bank debt to pay back, and you can take your profits and plow them back into new furniture and other neat stuff as you go. 

Entrepreneur Magazine has a good article with some additional advice on this subject.  Here is the link:  http://www.entrepreneur.com/money/financing/financingcolumnistdavidnewton/article41520.html

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