Last week we discussed how to develop your concept and create a business plan to get your project a bank loan. It’s now time to review the other 3 “C’s” that will support the bank’s decision-making process in providing you with a business loan.
To receive financing on a business plan and concept, you have to establish that you, your team and/or your consultants have the experience and knowledge to implement the concept spelled out in your business plan. As the team at Acara always say: “banks don’t finance businesses, they finance people.”
Lending institutions and underwriters will utilize your credit scores to determine your ability to repay a loan. There are three large credit agencies that track credit and provide scores: Equifax, Transunion and Experian. Today, we believe it is imperative to have a score of 700 or better in order to secure a bank loan with terms that Acara would deem acceptable. If your credit score is below, 700, do not fear, there are plenty of equipment financing companies that can help you receive the funds necessary to start a practice. If you proceed with this option, it’s important to know that you will be paying much more in interest with a shorter repayment term.
Banks are not in the business of risky investments. Almost all lending institutions will seek close to 100% in guarantee for their business loans (through a combination of SBA backing and your personal collateral). This can be accomplished through leveraging your personal and business assets such as securities, home equity, etc.
A Hypothetical Scenario
A majority of Medical Spa development projects cost right around $1M. This is also an easy round number for illustrative purposes. Most entrepreneurs would fund a million-dollar project on an 80/20 owner’s equity to bank financing split:
Owner’s Equity: $200K
SBA Backed Bank Financing: $800K
The team at Acara has worked with large corporations, small businesses and individuals to finance over $90 million dollars on behalf of hundreds of clients. We know how to approach building a financial model and business plan that will lead to a successful practice. Contact our team today to receive more information about our development process.
Call to speak with the aesthetic medical business experts: 203-678-9887