5 things to consider before taking a business loan
Staying competitive in a rapidly evolving field like dentistry can be challenging.
Whether you’re interested in upgrading your equipment, renovating your office or moving into a bigger space, sometimes the only available choice for footing the bill is a loan. Here are 5 things to consider taking a loan.
1. Define a specific purpose for the funds
Avoid borrowing an arbitrary amount for the general improvement or growth of your practice. A vague plan can lead to overspending or running short on funds before completing your upgrades. Pinpoint a specific purpose for the loan and create an itemized list of expenses.
2. Aim to keep business and personal assets separate
New or smaller practices will often be asked to provide collateral when taking out a business loan. Do your best to only collateralize business assets–having your home on the line is a stressful option.
3. Negotiate a flexible repayment schedule
Try to arrange a flexible payment plan that ebbs and flows with your practice’s monthly revenue. It’s very helpful to postpone or lower payments when times are lean and to have the option of paying your loan off early to save on interest.
4. Major loan types
A traditional bank loan can be ideal for long-term expenditures such as opening a new practice, renovating your office or purchasing expensive equipment. A traditional loan generally requires a good credit score and at least 30 days to process.
Smaller, short-term expenses such as covering payroll or purchasing equipment are often better served by a line of credit.
A Small Business Administration loan can be an interesting option but can takes 90 days to process may require a detailed business plan. Interest rates can be slightly higher than traditional loan but longer amortization schedules mean lower payments.
5. What will my loan look like down the road?
Be aware of teaser rates or other introductory offers. Only take loans where you will be unhappy with the terms down the line.
Always speak with your accountant and/or financial advisor prior to choosing a loan.