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Updated: April 1st, 2020
Operating a dental practice comes with certain necessary expenses, from leasing premises to maintaining your staff to keeping equipment up-to-date. Dental practice loans can provide funding to cover those and other costs when you’re starting a dental practice, growing an existing one or acquiring a practice owned by someone else.
Dental practice loans refers to business loans that meet the needs of new dental school graduates and practicing dentists alike. Like medical practice loans, they’re designed to help new and established dentists cover their various financing needs.
Dental practice loans can be used in a number of ways, making them a flexible business funding option. These are some of the most common uses for dental practice loans:
Consider the day to day costs of running a dental practice. There’s making payroll for the staff, purchasing supplies, and covering lease, utility and insurance payments. These typical working capital expenses can all be paid for using loans as your dental practice financing option.
Acquiring an existing practice or buying into one as a partner may require a significant outlay of capital. Using a dental practice loan to manage the associated expenses of buying into a practice or acquiring one outright allows you to preserve your cash flow and assets.
If you’ve been running a practice successfully for some time, you may decide to open a new location so you can serve even more clients. Or, you might feel like it’s time to spruce up your current premises with some renovations and upgrades. With dental practice financing, you can help fund both of those goals.
Starting a dental practice from scratch can be a daunting task due to the sheer number of things that need to be done. You need to find real estate and either purchase space or get a lease agreement in place. You then need to purchase all of the necessary equipment and supplies, hire and train a staff to help you run your practice, and invest in some marketing to get the word out. From dental equipment financing to loans for acquiring the new space, startup funds can help you get your new business up-and-running smoothly.
Dental technology is constantly evolving and you may need to invest in new equipment to keep pace with the changes. You can use loans for dental equipment financing to purchase pricey equipment or upgrade outdated tech around the office. Depending on the loan, you may be able to stretch repayment out over the useful life of the equipment.
You may already have a dental practice loan (or two) that you’re paying. If those loans have less than optimal interest rates or you simply want to streamline your monthly payment schedule, refinancing and consolidating business debt into a new dental practice loan could be the right choice.
The good news for dental practice loan seekers is that there are several ways to get funding to grow your business.
The SBA is not a lender per se; instead, it works with partner lenders to guarantee dental practice loans to qualified borrowers. There are a number of loan programs the SBA offers that dentists can take advantage of, including microloans and 7(a) loans.
Microloans are loans of $50,000 or less. These loans can be used to cover startup costs for a new dental practice, fund working capital needs or cover virtually any other expense. If you need more than $50,000, then a 7(a) loan may be the better fit.
SBA 7(a) loans offer between $5,000 and $5 million in funding, with repayment terms ranging from five to 25 years. These loans are typically geared toward established, for-profit businesses so it may be difficult to qualify for this type of financing if you’re starting a brand-new practice.
SBA loans can offer very competitive dental practice loan interest rates but the application and loan approval process can be time-intensive. You may want to consider another small business loan option if you need funding quickly.
Your bank or credit union is another funding option for dental practice financing. The amount of capital you may be able to get depends largely on the bank and its individual approval requirements.
Traditional banks like Bank of America and Wells Fargo offer loans to start a new practice, expand your existing practice or acquire a practice, each with different terms. Some allow for 100% financing, depending on the loan purpose. Like SBA 7(a) loans, borrowing limits can go as high as $5 million.
Expect your credit score and financial history to come under close scrutiny for a bank loan. If you have a preexisting customer relationship with the bank, that could work in your favor for loan approval.
Online lenders can deliver fast funding for dental practice loans, though you may not be able to borrow as much as you could with an SBA or bank loan. For instance, the loan maximum may be $500,000 instead of $5 million.
The advantage online lenders can offer, however, is fast funding. Once you’re approved for a loan, it may take just a few business days to receive the proceeds. That’s helpful if you need to move quickly when funding an expense for your business, and you can’t wait a month, or in some cases, multiple months, for traditional dental practice financing.
An online lender could also be a preferable option if you’re a new dentist without substantial time in business or credit history. Online lenders may be more lenient in their requirements, compared to SBA lenders or banks. The trade-off, however, is that a lower credit score could result in a higher interest rate on your loan.
Short-term loans are what they sound like: financing that’s designed to help meet a temporary funding need. In a dental practice setting, you might use a short-term loan to pay your business taxes or cover annual insurance premiums.
Other types of short-term financing include business lines of credit and business credit cards. Both offer a revolving credit line that you can borrow against as needed. That advantage is that unlike a dental practice loan, which delivers a lump sum of funding, you only pay interest on the portion of your credit line you’re actually using.
Short-term financing may be more appropriate for smaller expenses or purchases that you can pay off fairly quickly, since typical repayment terms are usually 12 months or less.
You need equipment to run your dental practice and that’s where equipment financing can help. These types of dental practice loans are designed to help you purchase or replace equipment for your practice.
Depending on the loan, you may be able to finance 100% of the equipment’s cost. The equipment itself usually serves as collateral so you don’t have to pledge any other business or personal assets to get the loan.
Another added benefit of dental equipment financing is that in most cases, the loan repayment term can be aligned with the equipment’s life span.
The first thing to do before applying for dental practice financing is become familiar with different loan options. In comparing loans, consider:
One of the most important things to take into consideration is the minimum requirements lenders look for when approving dental practice financing. Applying for a loan that you have no chance of qualifying for is not the best use of your limited time.
You’ll likely need to share a copy of your business plan as well as your credit scores, time in business and revenues if you have an existing practice. If you’re a new graduate who’s planning to open a practice, the lender may also take your student loan debt into consideration.
Every lender views student loans differently and while it won’t necessarily count against you, you should be aware of the maximum debt load a lender will accept. Including a line item in your business plan that details how you’ll pay your student loans back could work to your advantage in demonstrating your creditworthiness for a loan.
Your practice’s location and the type of practice can also carry weight in lending decisions. Essentially, lenders want to ensure that you have steady cash flow coming in to repay a loan. So if you’re operating a general practice that offers family dentistry in a high-traffic location, for instance, the lender might view you as less of a risk. If you’re highly specialized with a smaller client base, on the other hand, that could result in being approved for a smaller dental practice loan.
Finally, the loan’s purpose is something else to consider. If you’re acquiring a practice, for example, the lender will want to see projections for the practice’s financial viability. And if you’re using the loan to start a practice, your business plan is critical in spelling out exactly how the money will be used, what type of return you expect on the investment, as well as your timeline for becoming profitable.
If you’re looking for fast and affordable dental practice financing, Funding Circle can help.
For dental practices, we know that time is money. Unlike a bank, our application process is quick, easy, and transparent so you can focus on what’s most important — delivering the best care possible to your patients. You can apply for a dental practice loan online in just 10 minutes, and get a decision in as little as 24 hours after document submission.
Funding Circle offers dental practice loans with competitive interest rates. Plus, our fixed annual interest rates make your repayment schedule predictable – just a consistent, once-monthly payment over the life of your loan.
If you’re looking for funds to take your dental practice to the next level, take a minute to get your personalized rate quote.
Why should I get dental practice financing from Funding Circle as opposed to a bank or other lender?
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Do I need to have collateral for dental practice loans, and if so, what would be acceptable collateral for a dental practice loan?
Paige Smith is a Content Marketing Writer and Senior Contributing Writer at Funding Circle. She has a bachelor's degree in English Literature from Cal Poly San Luis Obispo, and specializes in writing about the intersection of business, finance, and tech. Paige has written for a number of B2B industry leaders, including fintech companies, small business lenders, and business credit resource sites.