StudentDC Interactive

The SBA (Small Business Administration) just announced two new courses to help small business owners learn more about how to get a loan.

I put a blog post on this subject on my About.com site (U.S. Business Law & Taxes).  The post links to the two SBA “courses” (really PowerPoints):  One on the basics of an SBA loan guarantee, and the second on how to prepare an SBA loan package. 

Please take a look at this site, and the 5 “Realities” of SBA loans.  This is important stuff, and it answers a lot of questions I get from students and grads about the SBA loan process.  For example:

1.  The SBA does not loan money.

2.  Your personal credit does matter.

3.  You can’t get a 100% loan.

4.  You can’t get a government grant for a chiropractic practice.

The contract says, “Associate Agreement.”  What does this mean?

I’ve probably talked about this before, but I saw a discussion on a chiropractic discussion board recently about this subject, so I thought I  would talk about it again.

First, understand that “associate” is not a legal employment term.  That is, the IRS and the states do not recognize this term.  They want to know if the person is an (a) employee or (b) independent contractor.  You can call it what you want, but these are the only two terms that have any meaning.

Second, the IRS assumes that someone is an employee unless there is compelling evidence that they are not (i.e., that the relationship is independent contractor).  This means the worker must (1) have income tax withheld from his/her pay and (2) the worker and employer must share in their contributions to FICA/Medicare. 

The IRS has criteria for determing if a worker is an employee or independent contractor, based on three factors: financial control, behavioral control, and nature of the relationship.  Read IRS Tax Topic 762 for more information. 

Now, I’m not telling you not to sign a contract.  I don’t give legal or accounting advice.  I’m just telling you that you need to be aware of what the doctor thinks it is and what that means to you.  If the doctor is considering you an independent contractor, you will have to pay your own FICA/Medicare (”self-employment taxes”) and you won’t have any withholding to use to pay your federal, state, local income tax. 

If you have questions about this, or you have a contract you want me to take a look at, I would be happy to do that.  Remember, no legal or financial advice. 

This new DC opened in November and closed in April. A record? Probably not.

If you’re asking “What does ‘undercapitalized’ mean?” let me explain.
I will be talking to her on Monday but here’s what I am guessing, based on what I see a lot these days:

1. She had grandiose ideas of what she wanted in her practice, so when she did her planning, she included all of the “nice to have” stuff as well as the “need to have” stuff. And she was able to get a loan for all this stuff, so she bought it.

2. She didn’t save enough money for “Working Capital” - the money you need to keep paying the bills until the patients start coming in.

3. I know she did some marketing (a direct mail campaign, for one thing), but the patients didn’t come in fast enough.

In other words, she didn’t have enough “capital” (CASH ON HAND) to keep her going while she brought in new patients.

So what is the “take home” message?

When you get your new practice loan, DSATM - Don’t Spend all the Money! Buy only what you absolutely need, and save as much as possible to pay bills. You can always buy stuff later, when the money is coming in. A little restraint now can mean the difference between a successful first year and closing your office.

I’m meeting with the DC on Monday; I’ll let you know what I find out.

The other day, I talked with someone who told me she had paid $1200 to someone to help prepare her SBA loan paperwork.  She said the bank told her they would only take the loan with an SBA guarantee and that they weren’t “comfortable” with doing the paperwork themselves.  So the recommended someone (probably the banker’s brother-in-law!) to help with the paperwork at a cost of $1,200. 

Now, I understand that SBA paperwork is a daunting thing.  Like any government paperwork, it’s full of nearly incomprehensible questions and ridiculous requirements.  But, doggone it, there’s just no reason to have to pay someone $1,200 for this work!!! 

Here’s what I would suggest in this case:

1. Find another bank.  There are plenty of banks who are SBA preferred and SBA certified lenders, who know how to help you with the paperwork.
2. Go to the SBA directly and ask for help.  Your local SBA person can help you walk through things.
3. Go to your local SCORE chapter and ask for help. Many SCORE chapters have weekly Q&A sessions where you can find answers.
4. Find a CPA (you will need one anyway) and have this person help you.  It will be a good way for you to test this CPA’s qualifications.  If he or she doesn’t know what an Income Statement is, for example, you have the wrong person!

For more information on obtaining a loan with an SBA guarantee, go to this StudentDC article. 

A tip I received from a student:
He suggested not using your personal name for your practice name. While we all want to see our “name up in lights,” this may not be the best idea for a practice name in some circumstances.

If you grew up in the town and you were a rowdy teenager, you might not want everyone in town associating your practice with your past exploits in high school. On the other hand, if you were a model citizen, it might be great for you to tell everyone you’re back in town as a professional.

The biggest reason for not using your own name for your practice is in case you want to sell the practice. It’s much easier to sell “Perfection Chiropractic” than to sell “Cosgrove Chiropractic.”

Choosing your practice name is one of the most difficult and important decisions you’ll make when you start out. See StudentDC for more tips for choosing a practice name.

You know what I’m going to say … “It depends.”  Here is what I told a young DC recently:

I don’t agree that yellow pages ads are a waste of time.  I know a couple of chiropractors who get a respectable number of new patients from YP advertising.  I don’t think $103 a month is very much, if you’re getting in the printed phone book and on yellowpages.com for that price.   

I would think your best advertising (particularly if you’re in a small or medium-sized town) would be community involvement, health fairs, other local events, just getting out where people are, especially women and families.  This doesn’t cost much (the price of a business card and a brochure).  I’m sure you’ve already done some of this. 

This DC also asked about whether to set up a website.  Again, it depends on the area.  In a small town, don’t bother.  In a medium-sized town with several competing chiropractors, it can give you an edge and help new people find you.  In a big city, it’s definitely a good idea. 

Of course, this is all my opinion.  I’d like to hear from you.  What do you think?

For more information, see what Dr. Mark Swerdlick says about essential steps for startup marketiing.

If I had a nickel for every time I’ve been asked that question, I’d be a millionaire.  And if I knew the answer to that question, I’d be a billionaire!

I recently heard from a young DC who had associated for several years, had about $25,000 in cash and assets, and a credit rating over 700.  Sounds like a slam-dunk, yes? Well, no.  That’s why he was writing me, for some help.  Here is what I suggested:

1. Go directly to the SBA in your area and see if you can get pre-approved.  The SBA might even know of a bank that might be willing to take you.  With a pre-approval letter from the SBA, you might have a better chance of getting a bank to talk to you.
2. Get involved with networking in the community where you want to be.  Go to Chamber of Commerce meetings, other community events.  What you’re trying to do is get personal contacts with bankers in the area, showing them that you’re interested in the community and that you’re serious about opening a practice.  Ask lots of questions, talk to people about your plans, get them involved.  You never know what might happen.
3. Cut down on the amount you are requesting.  Keep the asset purchases to a minimum and get some money for working capital. Consider what you absolutely must have to start.  People will understand if you don’t have a lot of fancy office furniture.  You can always buy more later.
4. Consider an additional credit card with zero interest.  This is usually a last resort, but with your credit score, it should be possible.  Then spend carefully.  After a few months of getting money in from patients and showing good financial statements, you might be in a better position to go to a bank and ask for a loan. 

I hope these suggestions help.  I know there’s no one magic answer; it’s a matter of persistence and flexibility.  Keep on – you will find a way.  Let me know if I can help or if you need my opinion on your business plan.

In addition, here are a couple of articles from StudentDC.com that might help:

Finding collateral for your startup loan   and   Obtaining an SBA loan guarantee. 

A fellow blogger wrote a post today about credit reports, saying you should avoid “Freecreditreport.com” because of the fine print.  Read her post here:  http://www.yieldingwealth.com/want-your-credit-score-be-prepared-to-pay-for-it/

Here’s a suggestion when you’re going to banks to apply for your practice startup loans:  Go to annualcreditreport.com and pay for the three FICO scores.  Then take the entire report, plus scores to each bank.  Show them the report instead of letting them “hit” your credit score. 

Here is a Chiropractic Economics article you might find helpful: 9 facts you need to know about credit

And here is a StudentDC article about Checking and Repairing Your Credit.

When I read an associate or independent contractor contract, I pay close attention to words.  I ask myself, “Is the meaning of this term clear?”  For example, I recently saw a contract that used the term “net collections.”  Do you know what “net collections” means?  Net of what?  Net means something is taken out, but what?

Today I saw an associate contract that used the term “earnings.”  I don’t know what “earnings” means, either.  Is it the amount of earnings (profit) of the practice as a whole?  Or is it (more likely) the collections attributable to a specific associate?  It’s much better to clarify assumptions now than to find out later that something didn’t mean what you thought (assumed) it meant. 

Don’t assume you know what a term means.  ASK.  Remember what “ASSUME” stands for - “ASSUME makes an “A**” out of “U” and “ME.” (sorry for ther terminology, but you get my point)