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SJBird55 -> Re: Private Practice Financing (April 28, 2005 2:30:00 AM)
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I've just started a clinic, although I'm not open yet. Since it is an LLC, the money made or lost is always tied to me and my social security number. Because it is an LLC, I also won't have a W2 for myself.
We decided the most cost-effective way without any fees would be to outright purchase the equipment with our own money and create the paperwork that the business is leasing the equipment from us. So, what we did is use a lot of our savings to purchase the equipment and then we took out a line of credit. The line of credit is through us, not the business. The line of credit is nice because the money is sitting there, but I'll only have to pay back whatever I use, instead of the way a loan would work. For me, I think the financial aspect is going to get confusing... but my husband has a MBA and basically deals with finances day in and day out and to him what we are doing isn't unusual or confusing.
If you don't go that route, then you will need to have a lot of information formally put together to have a bank back your business proposal and a lot more red tape. And, from what my husband said, a bank won't always just back a new business without some sacrifice on the part of the owner. I'm not sure exactly what that means, but he was looking to buy a $1+ million dollar company and at the time knew he'd have to show that he'd only be paid like $20,000/year to show he'd be taking a risk by not paying himself the $80,000+ a year. (I can't remember what exactly happened in that case, but he didn't go through with it because when he looked at the business records the accountant had done some dinking with the funds and he decided it was too great of a risk and that the company worth wasn't as the owner said.)
Another source of information - the small business bureau. They do have some free programs offered to provide advice for anyone interested in starting up a small company. I met with a retired executive and I believe that if I would have gone the loan route, he would have helped me put together the information I needed. Looking back, I had already put together an analysis of the business, a SWOT, and a marketing stratety - so I was way ahead of what most people do when they meet for advice. I was meeting with him to just pick his brain to see if I had overlooked something important.
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