Jordan Arovas, SVP & Manager, Specialty Business Banking, Webster Bank
Let’s say you’re a sole practitioner who needs to ramp up marketing in a highly competitive community—or a group practice, frustrated by third-party payment delays.
Perhaps you’re a Boomer looking at an ever-nearer retirement horizon—or you’re fresh out of dental school with big plans and even bigger student loan debt.
Maybe you’re a dental entrepreneur, eyeing the possibility of creating a sideline business—or the tenant in a rental property whose practice needs a roof of its own.
Common denominators? A need for credit, improved cash flow, and the eyes of a financial specialist who really understands the world of dentistry today. In that capacity, we’d like to offer a few questions for your consideration.
Do you feel a little pinch—cash flow-wise?
Probably, more than a little. Today, 77 percent of Americans have some form dental insurance—and delays from third-party payers put a serious crimp in cash flow. Cash flow problems are the #1 reason that small businesses fail.
But, like cavaties, many cash flow problems are preventable. For example, a line of credit can fill the receivables gap when reimbursements lag behind. It may also smooth out unplanned expenditures and cover current operating expenses: rent, payroll, suppliers and other obligations.
Ask yourself: Are you doing everything you can to make payments more efficient? For example:
- Are you using remote check deposits to accelerate cash flow?
- Do you have a website portal that enables online automated clearing house (ACH) payments?
- Does your merchant services provider offer next-day funding?
To potentially gain efficiencies and lower overhead costs, some sole practitioners join forces with another dental group. Others may buy into a franchise concept, capitalizing on support and systems already in place to build a practice. The benefits of either decision should be carefully measured against the obligations they create—another reason why you may choose to deal with lenders who know the ins and outs of these relationships.
Do you need to make a marketing impression?
Competition is tight, with a high dentist-to-patient ratio. So you may be looking to beef up your presence on social media, create or enhance your website, launch a direct mail campaign or purchase a patient database.
Those investments likely require working capital. Working with your lender, you can discover financing options specifically designed to address the working capital needs of a dental practice.
What’s drilling into your operating capital?
If you rent now, you may be considering buying your own building. You may be weighing the advantages of equity versus the responsibilities and cost of maintenance.
Investments of that size can have a destabilizing effect on your finances if they aren’t balanced against the other demands of your practice.
Or perhaps you plan to add new state-of-the-art equipment or IT and software upgrades. Keeping up with technology can be expensive, but it can lead to new services, new efficiencies—and new revenue.
Those are just two compelling reasons you may consider looking into SBA financing, including the SBA 7a and 504 programs for expanding or modernizing your practice. SBA loans usually require lower down payments and can offer longer terms, which reduce the impact on your cash flow.
Consider reviewing the pluses and minuses of conventional versus SBA loans, based on your unique goals.
Are you looking at new revenue streams?
Dental entrepreneurs often invest in new business ventures outside their practices: commercial real estate, technological innovations or consulting services. That often requires start-up capital.
New possibilities can also mean new risks, even with the most successful dental practices. Lenders will evaluate your enterprise through that lens—another reason to build a relationship with a lender who knows your business intimately. The better their understanding, the better your chances of gaining the support you need.
Do your funds need a night guard?
Fraud is on the rise—and more than 70 percent of cyber attacks target small businesses, according to the National Cyber Security Alliance. Professional practices are especially attractive targets, given all the patient, insurance and payment data in their computers.
Implement fraud services for your account with:
- Check Positive Pay - comparing the checks presented for payment to your data in your bank’s files—by serial number, amount, and payee name.
- ACH Positive Pay – identifying potentially fraudulent debits presented against your account. It matches incoming ACH debits against your authorization instructions and allows you to make pay/return decisions online.
- Alerts and services that enable you to review your banking transactions daily, rather than at the end of the month—so you can address fraud or other issues in a timely manner.
Above all, be proactive. Have a regular conversation with your banker about emerging new threats and the newest ways to thwart them.
Are you on the cusp of retirement?
You may be thinking about selling the practice outright or bringing in a younger dentist to take over eventually. Either way, it’s wise to think about succession planning, now.
Consider calling a meeting of your trusted advisors: your banker, CPA, attorney and insurance professional. Get their informed view of the value of your business, both to yourself and the outside market. This year in particular, as the impact of the Tax Cuts and Jobs Act arrives, tax implications could be crucial.
Do your student loans have a huge overbite?
If you’re young in your career, student loan debt may be the obstacle to buying into a practice (or starting your own).
If you haven’t considered refinancing your debt, consider this: Now that you have your degree and are out in the working world, lenders might consider you a better risk than back in the ramen-noodle days of dental school. Therefore, you may qualify for a lower rate or better terms—even though interest rates on other types of loans are on the rise. Consider looking into it.
3 Steps to prepare for a conversation with a lender
You can improve your chance for a successful outcome by following these steps:
Organize your business and personal financial information. A lender will likely want to see how your practice’s numbers compare to industry metrics. You may also need to provide a personal financial statement. Lenders may want to gauge your ability to cover a potential financing request or debt service on a loan. They may require collateral from personal or business assets.
Know your credit score and check to make sure there are no errors on your credit reports. They’re far more common than you might think. In fact, CNBC reports that more than 1 in 5 consumers have “a potentially material error” in their credit file—a mistake that makes them seem like a bigger risk than they actually are. Check your credit reports at www.annualcreditreport.com.
Come in with a thorough business plan, complete with projections. Work with other business partners to be sure you’re all on the same page. Get free guidance through SCORE, the Service Corps of Retired Executives, America’s largest network of volunteer, expert business mentors. They’re a resource partner of the SBA, able to give you invaluable perspectives on growing a small business.
Above all, it’s wise to develop a relationship with your lender. The better a banker knows the specifics of your practice, the more effective the advice on financial services and their impact on your operations and employees can be.
Webster Bank, named number one SBA lender in New England ranked by dollar amount, according to the Small Business Administration, stands ready to assist you with deep expertise in the finances of a dental practice.
The opinions and views in this blog post are those of the authors, and are not intended to provide specific advice or recommendations for any individual. Please consult your tax advisor regarding your individual situation. All loans and lines of credit are subject to credit approval. The Webster symbol is a registered trademark in the U.S. Webster Bank, N.A. Member FDIC.
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