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 get your MedSpa 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(TM) 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
2. Be prepared for all the fees
Many people don't realize the SBA charges a guaranty fee that is
typically around 3% for a medical spa. 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 7 or 10 years versus 5 years for a traditional loan. The longer the term equates to
lower monthly payments, which can help you during the startup phase.
4. Additional collateral and a down payment will usually be
SBA guaranteed loans usually require additional collateral if the
business assets are not adequate to cover the loan. Personal residences are often the most used source of this
addition collateral. You will generally require a 20% down payment (unless you're a physician, then only 10% may be
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 is disbursed in a lump
The above 5 pointers should help you better understand how SBA
guaranteed loans actually work so you can be better prepared. "SBA guaranteed loans are great for new business
owners who have available equity in their home, and physicians since it allows physicians up to 90% financing
without additional collateral."
For more information on the SBA and its loan guarantee programs,
go to the agency's Web site (www.sba.gov) and click "Financing."
About MedSpa Financing (Oakridge
MedSpa Financing is a division of Oakridge Healthcare, which provides
turn-key healthcare financing solutions to medical practices and equipment vendors
throughout North America. MedSpa Financing is the only financing company that specializes
in financing Medical Spas. We have the capacity to finance everything from a single
treatment machine to an entire $20 million Medical Spa facility. For additional
information, visit our website: http://www.medspafinancing.com. MedSpa Financing is a sustaining member of
the International Medical Spa Association.