More nurse practitioners are starting their own practices and businesses, and finally you are ready to start yours. But there is a slight hurdle to get over: you don’t have enough cash to get started.
And someone else wants to expand the services he/she offers in their practice. And yes, you guessed it: there is a slight hurdle to get over. The equipment required for this new service takes a great deal of cash, which just doesn’t exist right now.
But wait, before you give up on your dream and walk away, let’s look at what you can do to get past this annoying little obstacle.
If you are just starting out and need cash to finance your startup you have a number of different options: taking out a business loan, utilizing equity you may have in your home, using personal credit cards or asking family for a loan.
- While asking family to help you with financing your startup is easy, it may not always be the best. If you decide to go that route make sure that everything is spelled out on paper, otherwise you may find your family relationships on rocky ground.
- Using personal credit cards is straight forward. A word of caution though. If you decide to accept a promotional offer (“No Interest, No Fees …”) make sure you read the fine print and make absolutely certain that all payments are made on time. Penalties and increase in interest rate as a result of late payment can sour that “sweet deal” in a heartbeat.
- Tapping (repeatedly) into home equity was a common practice just a few years ago. If you still have adequate equity in your home, congratulations! Again, read the fine print and make sure that all payments are made in a timely manner. Yes, a late fee may not be the end of the world, but ultimately your home could be on the line.
- Lastly, you could be applying for a business loans, typically through a bank or financial institution. Often you are required to submit a business plan with your loan application. But before you rush out and go that route, be mindful of your overall financial picture. Your prospective lender’s most pressing question will be: can he/she repay the loan within the terms of the contract? And, in case of default what other assets are available to meet the loan obligation? So be prepared to address those questions!
Now, if you have been in practice for a while you have additional tools at your disposal. The most common ones are: a business credit card, trade terms with suppliers and a line of business credit. Let me outline how these extra tools can work for you.
- Opening and maintaining a business credit card is a must for every business! At minimum it will do two things for you. It allows you to keep business and personal expenses separate (priceless at tax time!) and it builds credit for your business.
- Establishing trade terms with your suppliers can help your cash flow and at times get you through a pinch. Once you have done business with a supplier for a little while, you can ask them to establish trade terms. This means, on approval they will allow you to purchase goods or services on credit for a specified time (typically 30 or more days).
- Lastly, we have the business line of credit. I believe this is a must for most businesses, because as we all know, it is very hard to get money when you really need it. So, let me suggest that you open a line of credit with your bank when you don’t need it and simply have it available … just in case. Sure, it will cost you a bit of money, but I think it is well worth it.
©Johanna Hofmann, MBA – All Rights Reserved.
Written exclusively for Nurse Practitioner Business Owner™