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the loan application. This pro forma business plan shows your future
needs as well as the level of debt you can repay.
? The bank must understand how the loan relates to your strategic
plan. For example, if you are adding providers and need $100,000 to
expand, will that amount be used for working capital and improvements?
Will another loan be required for related issues? You may
find it easier to repay excess funds than to obtain additional funding
if the size of the first loan is insufficient.
How the Loan Will Be Repaid. You will be expected to demonstrate
to the bank your ability to repay the loan. The main evidence is
your business plan, which illustrates the ability to repay the debt from
projected income in excess of expenses.
You may also need a contingency plan showing what steps you would
take if the financial projections proved incorrect. The contingency plan
may indicate a source of repayment other than practice income,UGG Sale, such as
a guarantee based on your personal assets.
THE SIX CS
Bankers consider several factors when evaluating your credit application.
These are known as the six Cs:
1. Character
2. Capital
3. Capacity
4. Collateral
33
How Lenders Evaluate Borrowers
5. Circumstances
6. Coverage
Character. This is an intangible and subjective quality that contributes
to the lender’s belief that you will repay the debt. The lender
attempts to measure character through analysis of the following:
? Your credit history
? References from your accountant, attorney,Ugg Classic Tall, and others
? The level of preparation in forecasting your ability to repay debt
? Your attention to your budget and cash flow
The bank may consider all these factors and make a judgment about
your practice. The better the lending officer knows you, the more likely
he or she will judge your character favorably.
Capital. This is the amount of equity (in the form of cash) the practice
owners have contributed to the business. A practice with a large amount
of equity indicates a high level of commitment from the clinicians to the
future plans of the practice. As the risks associated with practice have
increased,ugg classic short, banks have started to insist on a greater amount of equity
investment by the owner(s). The larger the equity, the less the practice
needs to borrow and the less financial leverage exists.
The proportion of debt to equity may be an important consideration

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