Top tips for financing your business
Finance for the long term
Building an allied health practice is a substantial capital investment that will take years to pay off. Ensure that your loan is spread across a suitable number of years. The last thing you are likely to want is to have to re-finance your business every two years. Financiers will know when you have to refinance. They may use that to their advantage in the interest rate bargaining process. Better to avoid any surprises and extra paperwork by securing funding for the long term.
Be conservative with the repayment schedule
Even if you have run a great practice in the future and have great staff, things can happen. Great people can get poached, or have accidents, so make sure that your repayment schedule reflects a conservative forecast of future growth of your client base. If you do beat your forecast, great! You can always keep your repayments low and use spare cash to fund satellite locations that drive additional clients to your primary practice.
Fixed versus Variable Interest rate
Fixed rates suit those that want to avoid any chance of interest rate rises throughout the life of the loan. Rates are close to all-time historical lows at the moment, so it may suit you best to lock in. Whilst locking in a fixed rate and fixed term might save you 0.25%, such a loan may constrict your future strategic freedom. Fixed interest rate loans are more likely to have penalties in these circumstances. If the business does better than you plan, you may want to pay the loan out earlier.
If you anticipate potentially bringing on new investors in the business, you may wish to use that capital to pay down some of the debt, fixed interest loans are more likely to have penalty clauses in these circumstances.
*These tips are general commentary and are not financial advice. Please seek independent, qualified financial advice and have your own individual circumstances considered before making any investment decisions.