Practice Startup Success

Chiropractic Education as an asset

Q:  I'm working on my business plan and loan documents.  Someone told me I can list the value of my education as an asset in my personal financial statement.  How do I do this?
A:  While your education certainly has value to you in your practice, this number can't be calculated.   

What’s the “value” of an education? Is it the equal of the student loan balance, or is it the lifetime earning power of the individual? It really can’t be quantified, and bankers/lenders need to be able to put numbers to everything in order to process a loan request.

Attempting to list your education as an "asset" signals your ignorance of basic business concepts and may cause your lender to look less favorably on your business acumen. 

For more information on financing your startup, read Planning for Practice Success (available on Amazon and on my website (www.dcpracticesuccess.com). 

Cash "infusion" - sounds like a blood donor

Some advisors talk about a "cash infusion" like it is a blood donor thing.  Well, it is, kind of.  A cash infusion is the cash the owner of a business puts in from his/her personal funds to get the business started. If you have enough cash to "infuse," you wouldn't need a loan.  In most situations, though, the startup requires more money than the owner has. 

What if you have funds but you don't want to spend them?  Sometimes a bank will allow you to "pledge" or "assign" the funds (like a CD or stock, for example), and only sell them to pay the bank if something happens.  In other cases, the bank wants pure green cash.  You never know....

Same with a co-signer.  I have heard of co-signers pledging property, usually with a second mortgage, or farms, or mutual funds.  Sometimes the bank wants the co-signer to come up with cash.  Again, you never know....

What can SCORE do for me?

What is SCORE?  Can they help me get a startup loan?

SCORE is the Service Corps of Retired Executives.  They provide business advice and training.  SCORE has local offices all around the country.  They can help you write a business plan and work on the financial statements needed to take to a bank, but they don't fund business plans or help you get funding.

Having said that, it is quite possible that if you have a SCORE mentor, he or she might have contacts with local banks and may be able to steer you towards a bank who might be willing to help finance your practice.

Always ask; you never know who knows who.

For detailed information on preparing your business plan and getting it financed, buy Planning for Practice Success. 

How do I calculate monthly payments?

Before you go to the bank with your business plan and those financial spreadsheets, be sure you know how much your loan will cost you each month, as part of your monthly cash flow.  The banker wants to be sure you have enough money in income to pay off the loan! 

Figuring this amount is not something you can do yourself, but there are many loan calculators on the Internet.  They are called "amortization" calculators; amortization is the process of paying off a loan with principal and interest included.

Here are a couple of web sites with amortization calculators (in case one disappears or doesn't work):

http://www.hsh.com/calc-amort.html

http://www.bankrate.com/brm/amortization-calculator.asp

The last reports I received from students/grads going to lenders are that the interest rate is 8.5% to 9.0% or more. 

For more information on sources of funds for startup, buy Planning for Practice Success.