MedSpa Financing SBA Physician Loan Basic Requirements:

• Your investment must be 10% of the total project cost (i.e. $500,000 total MedSpa requires a cash investment of $50,000)
• Good Credit – Strong credit score (i.e. 650+) with a clean record.

5 Pointers for Obtaining Physician SBA Loans

One of the best programs in the United States for helping start new businesses is the SBA loan program. As with any government run program, it can be easily misunderstood. These 5 pointers will help you better understand what a SBA loan is and isn’t.

By far the most misunderstood method of financing in the U.S. is the SBA loan. Many people think a SBA (Small Business Association) loan is a low interest, non-collateralized loan issued by a government agency. In reality, a lending institution actually makes the loan to you, with the SBA guarantying a portion of it. The SBA limits its guarantee to loans over $150,000 to 75% of the loan value, so the lender is still on the hook for 25% of the loan if it goes into default. The primary benefit to a SBA backed loan is that the lending institution probably wouldn’t have done the loan otherwise.

SBA backed loans fill a void, helping new business owners start businesses. You can use SBA loan proceeds to purchase land, buildings, equipment, fixtures, supplies, construction costs, and provide working capital while you expand or get your practice up and running. The term is usually 10 years, longer if a building is included.

Medical Spas face additional hurdles since many lenders don’t understand what they actually are, or the revenue potential of providing cosmetic and anti-aging treatments like Botox™ injections, skin rejuvenation, and laser hair removal. If your local bank doesn’t understand the industry, don’t despair there are lenders who specialize in medical spa financing.

If you are considering a SBA guaranteed loan, here are 5 pointers to help you along the way.

1. Make sure you have lots of time and energy

If you are going to get a loan backed by the SBA, you are going to have to follow government generated procedures. Which means these loans are more paper intensive and take much longer than standard term loans. It’s not uncommon to see SBA loans drag out a month or two (or even longer). Before you even begin the SBA process, make sure you’ve completed a business plan with detailed pro forma financials. For more information, check out the SBA’s website on Business Plan Basics (http://www.sba.gov/starting_business/planning/basic.html)

2. Be prepared for all the fees

Many people don’t realize the SBA charges a guaranty fee that is typically around 3%. In addition, the lending institute will often pass on other third party costs, including: appraisal fees, legal fees, and a loan packaging fee. One fee the SBA doesn’t have for loans less than 15 years is a pre-payment penalty. This allows you to pay the loan off at any time without penalty.

3. Interest rates can be higher than traditional loans

Another myth is the SBA guaranteed loans have low interest rates. In most cases the SBA guaranteed loans interest rate will be higher than many traditional loans. The SBA does ensure the interest rate for loans over $50,000 does not exceed Prime Plus 2.25% for loans less than 7 years, and Prime Plus 2.75% for loans over 7 years. One of the benefits of the SBA loan, is the terms are often longer than traditional loans, for example 10 years versus 5 years for a traditional loan. The longer the term equates to lower monthly payments, which can help you as you build up your practice.

4. Additional collateral and a down payment will usually be required

SBA guaranteed loans usually require additional collateral if the business assets are not adequate to cover the loan. Physicians also generally only require a 10% down payment, thus giving them up to 90% financing.

5. You’ll have to wait to see all of the money

Once approved, the lender is not going to cut you a check for the full amount of the loan. What typically happens is you will need to submit vendor invoices, purchase orders, cancelled checks, or quotations before payment will be made. In some cases you may have to pay the vendor first, then get reimbursed from the lender. When the loan closes, your working capital will be disbursed in a lump sum to you.

Additional Tips for getting SBA approved:

• Comprehensive Business Plan (check out this SBA Business Plan Writing Guide)
• You should have about 10% cash into the deal (your Equity)
• Must clearly communicate how your startup Medical Spa is going to repay the debt
• You may want to use the SBA loan to borrow for "soft" costs like tenant improvements, build-out, and working capital. Utilize one of our equipment leasing programs to lease the actual equipment.
• Poor Management is the primary reason for bushiness failure (with under-capitalization a close second). Give examples of how you have managed a business in the past (and make sure you business plan is error-free).
• For more information on the SBA and its loan guarantee programs, go to the agency's Web site (www.sba.gov) and click "Financing."

For more information on our SBA loans, call:

1-800-485-5759 x705