Jeff Russell of Oakridge Healthcare, a health financing firm, posted a good article that outlines some of the key factors that borrowers should know about SBA loans. I’ve worked on a few, and I didn’t find them onerous. In fact, on the last one the bank looked at the loan both as a straight loan and SBA, opting for the latter. For the startup physician client of mine, is need was the loan.
SBA loans do require a business plan. I like that, of course, as I wrote the “Medical Practice Business Plan Workbook” and I enjoy the excitement and challenge of working with a client to write a business plan. The plan is your selling tool, forcing you to confront issues and to create a plan to build a successful practice – and pay back the loan. It may take longer to get an approval on an SBA loan. I was working with one large national bank, and I spent hours on the phone with them – and then they turned my client down. Another bank stepped in and approved it within 2-3 weeks.
Russell points out a few very important points that potential borrowers need to be aware of. One is that the practice must put up a 10 percent down payment if there isn’t sufficient collateral. Interest rates can be higher than conventional loans, and there are fees paid upfront.
That said – The SBA guarantee offers a degree of protection to the banks and enables them to take more risk than they might otherwise.
You should have a relationship with a banker – or two. Invite them to the practice, and show them what you are doing and share your business plan with them. What you are doing is to lay the groundwork for future needs. The lending officer can use their knowledge of the business and the managers as part of their decision making. By building trust and a relationship in advance, you improve the likelihood of an approval, and of the bank making an extra effort to help you meet your financing need.