Beware of scams when financing your practice

I still haven’t given up the idea of obtaining a tenant improvement loan or a working capital line of credit.  As of now, after all my startup spending, I stand to have left about 3 months worth of operating expenses.  If I include my credit card, which has an 11% APR, I should be able to survive 4 months without seeing a single patient. I would still sleep better at night if I had enough for 6 or 7 months though.

A few days ago, I submitted an online application to a healthcare finance brokerage company.  Today, I received an e-mail saying that I was approved!  In order to move forward with the loan, I had to submit a signed agreement, and a $750 non-refundable processing fee, which I could either wire or send as a cashiers check overnight.  I thought it was odd that those were the only two payment options available.  Reading through the agreement, I also felt that the language was a bit ambiguous.  It sounded like this broker would apply for loans on my behalf to lending institutions, and did not guarantee any terms, rates, or amounts.  There was no mention of what would happen to my $750 if all banks ended up rejecting me.  In addition, there was going to be a 5% closing fee to this broker, to which the $750 would be applied toward. I thought that was a lot for closing fees! Having not too many options, I still considered going for it.

However, the more I thought about it, something just didn’t add up.  I looked up this company’s corporate history on its state’s website, and saw that it had only been in existence since September 2010.  On the contrary, this company’s website claimed to have been in business for 15 years.  So, I did a Google search on the company for scams, and came up with nothing.  I did a search on the broker’s name, and it showed everything.  It turns out that this guy operated a different website in the past that targeted doctors.  I found complaints on Ripoff Report, saw the poor ratings at the Better Business Bureau, and even found blogs dedicated to exposing this guy.

I’m not going to publicly give out this company’s name because this guy apparently runs searches, and responds to blogs claiming that a competitor is running a smear campaign against him.  Given that he has my personal information, I’d rather not have him find me through a search.  If you would like to know the name of this company, send me a private message, and I’ll be more than happy to tell you.

Moral of the story.  Caveat emptor.  No matter how desperate you get, if things sound too good to be true, well, you know.  And make sure you read through every contract before you sign it.  I’m disappointed that I came up dry with my loans once again, but am happy that I didn’t lose money and suffer the headache trying to retrieve it.  In retrospect, I should have looked this company up BEFORE I gave out my personal information.  Oh well, most likely, nothing will come of it.

I’ve been using a credit watch service for the past few months, so I should be able to pick up suspicious activity early if something should happen. (2018 note: use the Credit karma or Experian app for free).

By the way, even if I do end up running out of money at 3 or 4 months into my practice, I’m hoping that I will be able to take a loan out using my accounts receivables as collateral… I hope.

Howie’s thoughts: most practices get enough revenue to cover expenses by month four or five; I had positive cash flow month two because my lease was structured to be rent feee for the first six months, the rent was amortized into the remainder of the five year term. The experts recommend you have access to a credit line of $100,000 in addition to your practice opening expenses.

Ways of screwing up to not cover expenses include but are not limited to delay credentialing by hiring a service that doesn’t do its job, or making the mistake of outsourcing your billing as well as not collecting patient responsibilities at the time of service.

Most folks who have worked as an associate will have a easier time obtaining funding as they are reporting existing income, or perhaps have savings or home equity to tap into. Here is my first post and second post about practice financing. Also, the economy is doing better in 2018, underwriting is less strict. The WSJ just had an article about the increasing popularity among banks for unsecured loans. Ho Sun has a series of excellent posts about equipment financing.

Ho Sun also posted: I just tried to get a credit limit increase on my Chase credit card, and wasn’t even approved for an extra dollar. I’ve had this card for 5 years with no late payments and carried a $0 balance 98% of the time.

And someone on his original blog responded: Go to a small local bank in the town where you will be opening. Talk to their commercial lending officer. You might be surprised at the deal you can come up with (good surprise.) Try more than one. An alternative is American Express, which also has a commercial lending department for professionals.

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