StudentDC Interactive

This is a sad story I saw about a new DC in Wichita, Kansas .  Reading between the lines, it sounds like he got in too far with a lease commitment, then he couldn’t get patients in the door fast enough (or he couldn’t get them to pay) to meet his commitments.  If he had borrowed a little more and spent a little les on startup, he might have had enough money to pay his bills while he was building his patient base.

This is a classic example of “lack of capital.”  It can happen any time, but is most common in the beginning.  How do you overcome it?  A wise chiropractor told me “DSATM - Don’t Spend All the Money.”  In other words, dole out your loan proceeds very carefully, not spending on all your “wants” but focusing on the minimal needs you have in startup and the requirments to pay back your loans and make required payments (like the lease, utilities, etc.).  Then you’ll (hopefully) have enough money to pay your bills while you work to build up a good patient base.

This young doctor sounds optimistic.  I would encourage him to try again.  What do you think?

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 than a loan, but it will keep your credit card balance lower.
• 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

I talked to a recent grad who said he had met with 4 banks.  All told him, “Your student loan debt is too high.”  That’s interesting.  I’d like to know if these banks would say the same thing to a medical school or dental school grad.  I am sure they wouldn’t.  Banks recognize that a health care provider is a low risk because they have spent the time learning their practice.   But… here is the difference:

THEY DON’T KNOW CHIROPRACTIC.  They don’t know these important figures about chiropractor income and compensation:

• Mean collections for chiropractic offices:  $294,909
• Mean net practice annual income: $134,832
• Mean DC annual salary: $94,116
• Total annual DC compensation: $118,709

These are very respectable figures, and they probably would surprise a skeptical banker.

***ALWAYS REMEMBER WHAT A BANKER IS CONCERNED ABOUT - GETTING THE LOAN PAID BACK. ***

Your job is to convince the banker that you can pay back the loan.  Use these figures and others from the  Chiropractic Economics Salary and Expense Survey to make your case.  Print out a copy and take it along when you make a presentation to a bank.

The answer is:  probably, but you will have to pay more to do this.  (In interest, I mean.)Here are some suggestions to work on to increase your credit rating: 

50 tips

Ways to increase your credit score

Here is an online workshop from SCORE that walks you through questions relating to starting your practice.  Here are some thoughts on what I saw as I took the workshop:

1.  You will have to log in before you can access the workshop.

2.  Skip the home business example.

3.  Use the retail business example and modify it for a chiropractic practice.

4.  Note that the working capital example asks you first to estimate PERSONAL expenses, then you will be asked to estimate BUSINESS expenses.  Don’t confuse the two.  The personal expenses are what you will need to live on while you’re starting your practice. 

5.  The workshop takes you through startup expenses first, then working capital.  Read the information working capital; this is an important concept for startups.

Here is the website:  SCORE Online Workshop

I wondered when several students talked to me about the “new” transition loans for health care proviers.  So I talked with someone at Wells Fargo.  Here is the deal:

These are nothing more than “unsecured” (no collateral) personal loans or lines of credit.  The “hidden” cost is the interest rates - depending on a lot of factors, including your credit rating, the rate is over 11 percent.  Yikes! 

Think carefully about adding another loan to your credit rating just before you go to the bank.  Instead of taking on more high-interest debt, cut back on your expectations, borrow less money, live frugally for a couple of years. 

If it seems too good to be true, it probably is!

I am not sure where this loan started, or who is funding it, but it’s a great idea.

Students have been telling me they can get a “transition” loan of up to $15,000 from NELNA or Key Bank.  The loan is a variable rate, right now at 11.5%, with a 20-year term.

I will keep you posted as I find out more information.