By Michael Tetreault, Editor-In-Chief; Additional Sources Also Include: SBA.gov
LAST UPDATED: DECEMBER 12, 2018 – Although concierge medicine and subscription-based membership medicine clinics and offices are popping up across the country, some hopeful owners are still struggling to get financing, and this has many “Docpreneurs” wondering how to go about getting the cash they need to either start or maintain their medical business.
These days, the application to secure a business loan is extensive and rigorous. According to a recent Pepperdine University survey, nearly two-thirds of privately held, small businesses said they were denied by banks when they applied for a loan. So many hopeful physicians have to get creative when it comes to raising money.
Here are a few tips:
Note: We are not rendering legal, accounting or other professional advice in this subject matter. It is up to the individual or business owner to seek out the advice of competent professional.
If you are looking for a loan under $50,000, a microloan may be the way to go. The Small Business Administration’s Microloan Program provides small, short-term loans through specially designated intermediary lenders, which are usually nonprofit community-based organizations. While the maximum amount is $50,000, the typical loan is for $13,000. The requirements to obtain a microloan are more lenient as far as your credit score goes, plus, many big banks are generally hesitant to approve loans for under $50,000.
Before you fill out that bank loan application, do some homework. If you are planning to use a bank loan to get your concierge medicine or direct care practice started, run a credit check and talk to local bankers about the criteria needed to get a loan. Then, make sure you have a solid business plan that includes details such as a competitive analysis, the management process, a marketing analysis and financial projections. Also be aware that you will be expected to lay out more of your own cash up front. Banks used to settle for anywhere from 10 percent to 20 percent in cash or assets put up by those seeking a loan. Now they are looking for closer to a 50-50 split, the more money that comes out of your pocket the better.
Instead of heading to your rich uncle, look into the relatively new phenomenon of “crowd funding”. This type of loan is where you get small chunks of funding from everyone in a group such as Kickstarter. This route has a lot lower risk for those involved. The other upside is you will have a lot of people with interest in your prospective venture and they may be more likely to give you referrals and opportunities down the road.
“Why does a successful transition need outside funding at all?” asks N. Scott Borden of Direct Pay Consulting. “With the new wave of affordable [Membership Medicine] practices that almost anyone can afford, patients are not expecting first class facilities. They value physician access above scenic views. By educating patients about [Membership Medicine] friendly health insurance plans, more patients will join the new practice. Our goal is to make these types of practices affordable for both physicians and patients.”
Additional resources include:
- AngelList, for angel investors: www.angel.co
- For creative projects in the arts/music (NOT FOR SMALL BUSINESS): www.Kickstarter.com
- Prosper.com — Prosper is America’s first peer-to-peer lending marketplace, with more than 2 million members and over $2,000,000,000 in funded loans. Prosper allows people to invest in each other in a way that is financially and socially rewarding. On Prosper, borrowers list loan requests between $2,000 and $35,000 and individual lenders invest as little as $25 in each loan listing they select. Prosper handles the servicing of the loan on behalf of the matched borrowers and investors.
- LendingClub.com — Lending Club is the world’s largest online marketplace connecting borrowers and investors.
According to Clark.com, getting a loan as a small business or an entrepreneur hasn’t always been easy. Big banks generally don’t care about you and the small community banks that were a pipeline of money for would be entrepreneurs have greatly thinned out after the Great Recession.
Thankfully, microloans financiers and peer-to-peer (P2P) lenders are filling the vacuum and have stepped up with funds for small business owners.
Then there are yet other newer players in the field like FundBox and BlueVine. Both will lend against your credit card receivables based on the historical amount of charge volume your business does. They offer credit lines to you with minimal paperwork, and use proprietary algorithms to make lending decisions. FundBox lends in less than an hour! The loans are not cheap, but they are quick. So the issue with them becomes the interest rates you’re charged.
Here’s a look at the best websites for small business lending
P2P lending is a way to cut the banks out of the equation that allows people to go online to borrow or lend money directly to each other. Prosper.com is the granddaddy in the field, but LendingClub.com has been growing nicely in recent times and actually overtaken Prosper as the industry leader.
You get your money fast once you pass underwriting with both Prosper and LendingClub. There’s no waiting as you might with traditional banks that take forever to underwrite a loan. Prosper has helped arrange $6 billion in lending, but rates range from 5.99% to 36.00% APR, according to the website. LendingClub, meanwhile, has similar interest rates and has funded $15 billion in loans to date. But note this well: Interest rates at both lenders are on the rise because of recent market conditions.
What Not to Do
The “don’ts” can be just as important as the “dos” when it comes to financing your concierge medicine practice clinic.
Here are three pieces of advice on the subject.
- First, don’t invest all your time in trying to raise money. There have been so many good business concepts that go south because the person has committed everything to raising money and puts the concept on hold.
- Second, ideas are great but execution is everything. Don’t pursue financing if you don’t have a working concept.
- Lastly, don’t get hung up on the interest rate. If someone is offering you $50,000 at 12 percent and someone else is offering you $30,000 at 8 percent, the loan with the higher interest rate may be the way to go if that is the capital you need and this may prevent you from spending more than you need.
More Educational Resources
We hope this article will help those who are looking to start your own concierge medicine practice in your local area. If you have any questions about the article, please be sure to leave them in the comment section below or email us your thoughts, comments or questions to firstname.lastname@example.org or call 770-455-1650.
We are not in the business of offering any type of legal or financial information regarding your specific situation. The author of this article, the publication, book, references, citations, web site(s), and all other associated reference tips, guides and materials above are designed to provide accurate and authoritative information with regard to the subject matter covered. The information is given with the understanding that the authors, publishers, distributors and its related affiliated or subsidiary companies are not engaging in or rendering legal, accounting or other professional advice. The authors, publishers, distributors and its related, affiliated or subsidiary companies, stress that since the details of an individual’s personal situation are fact-dependent, you should seek the additional services of a competent professional for legal, accounting and business advice for your individual practice. It is your responsibility to evaluate the accuracy, completeness and usefulness of any opinions, advice, services or other information provided as it pertains to your practice. All information contained is distributed with the understanding that the authors, publishers, distributors and its related, affiliated or subsidiary companies, are not rendering legal, accounting or other professional advice or opinions on specific facts or matters, and accordingly assume no liability whatsoever in connection with its use. Consult your own legal or tax advisor with respect to your personal situation. In no event shall the authors, publishers, distributors and its related, affiliated or subsidiary companies, be liable for any direct, indirect, special, incidental or consequential damages arising out of the use of the information herein.
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