When it's time to grow, where do you find the money?

Key Points

Credit is the oil that lubricates the machinery of most businesses and professional practices. Whether it's a loan to support renovation or expansion or a capital purchase, or just a short-term loan to meet operating expenses, almost every medical practice will need to depend on credit at some point.

The upheaval in today's economy has resulted in a credit crunch that has made it tougher than ever to swing a business loan. Still, with the right information and resources, you can greatly increase your chances of securing the loan you want.

"In today's banking climate, good deals still get done, but with more equity, more collateral, and much higher credit scores required of the borrower than in the past," says Linda Feltman, Pennsylvania State University Small Business Development Center.

If you're planning to look for a business loan for your practice now or in the future, here are some options, along with hints on how to greatly improve your chances of coming away with the money you need.

BANK LOANS

The first place that most doctors turn when they need a business loan is their local bank. "That's why it's essential to build a business relationship with your bank well before you need to ask them for money," says CPA Bill Rucci of Rucci, Bardaro, and Barrett, Boston. "Allowing your bank to become familiar with your practice and how it's progressing sets the stage for the time when you need to ask for a loan."

Rucci heads the firm's medical practice services group and currently has about 30 medical practices as clients.

For relatively new practices, many experts recommend the time-honored system of establishing a line of credit before you need it. "Take out a relatively small loan-say $4,000 or $5,000. Put that money in the bank, where it will draw a little interest. Then, a few months later, pay off the loan in full, plus interest," says Rucci. "Now the bank knows you, and you have a solid credit history."

Even after establishing a relationship, some credit seekers meet with frustration if the bank turns down their loan application. Many bankers say this rejection often occurs because the applicant has failed to come prepared with the information a lender needs to make a positive decision.

How should you prepare for a meeting with a bank loan officer? Rucci suggests that you come armed with:

"And be sure to take your accountant along," says Rucci. "With this kind of thorough preparation, the bank can give proper consideration to your loan application."