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The Complete Dental Practice Loan Guide For 2022

dental practice loans

Whether you’re running an orthodontic center, traditional center office, or a dental supply company, growing the business is an investment. So you’ll need funds to keep your dental hygiene equipment up to date, market your business, etc. That’s where dental practice loans come in. 

Sometimes, however, you may need cash for expansions or upgrades before you get your payment from a patient or dental insurance. 

So while you wait for your invoices to clear, consider dental practice loans to cover some crucial needs. We’ll explore everything you need to know, such as dental practice loan refinance, loan interest rate, and many more. 

With that said, let’s begin. 

Why Lenders Are More Likely To Offer You Dental Practice Loans 

Several things work well for dentists, and that’s why loan lenders are more likely to offer them loans. First, dentists have a healthy income with an average six-figure salary of $123,206 annually

Second, a dental practice can be a recession-proof business, like other health professions. It may be that you won’t go out to eat during an economic downturn. But you’re more likely to get a toothache removed. Who can endure such pain for long? 

Third, historically speaking, dentists have had some of the lowest cost rates in the medical industry. Because of these reasons, numerous lenders are more likely to give you a loan to help you start your dental practice. 

But before you search for the right loan lender and their dental practice loan rate, you need to know the type of loans first. Let’s find out. 

Types Of Dental Practice Loans 

Dental practice financing comes in two types: a business line of credit or installment loans. And you can use your dental practice loans for several purposes: 

  • Start a new dental practice, 
  • Buy out an existing dental practice 
  • Expand your practice 
  • Purchase commercial real estate 

Also, some lenders offer dental equipment funding. You can use such funds to buy x-ray machines, dental chairs, computers, etc. You can easily qualify for these loans because they’re secured by the equipment’s collateral (more on dental equipment funding later).  

5 Things To Consider Before Applying For Dental Practice Loans 

1. You Need A Good Credit

Lenders are pretty aware of new dentists with high debt-to-income ratios, so they’re accustomed to it. However, they prefer to reduce their risk, so you’ll need to have good credit. And if you’ve already gone for a previous business loan, they’ll check your strong business credit. 

According to MyFICO, a credit score between 670-739 is good; 800+ is exceptional. So before you go in for a practice loan, check your score with your credit card issuer or bank. You can also use free credit score sites such as Credit Sesame or Credit Karma. 

2. Develop A Good Business Plan 

Dental practice lenders want to be sure you can pay back, thus reducing risk. That’s why you need to have (and show the lenders) a good business plan. So come up with a good marketing strategy, growth strategy, operation details, risk analysis, etc. 

3. Take Advantage Of Group Discounts 

If you want to reduce your cost, make use of any available group discounts. If you’re a member of ADA or other similar groups, you can find dental lenders that offer exclusive fee discounts to such associations. 

For example, did you know that Bank of America gives dentists a 50% administrative fee discount from over 20 dental associations? So you can use this strategy to reduce your cost. 

4. Consider Your Practice Location 

If you don’t have community ties, it can be challenging to get a business loan. Do you have connections in your business area? Do you know people who can become your potential patients? Consider these factors before you proceed. 

5. Your Dental Experience Also Counts 

If you want massive loans, ideally, you should have more experience in dental practice. For example, it’s challenging, if not impossible, to get a $1 million loan for a new dental business if you’re a recent dental graduate. 

But the situation is quite different for more experienced dentists. 

Can You Acquire A Dental Loan With Bad Credit? 

dental practice loans

Your student loan debt, including your business and personal credit score, will most likely be a factor in getting a loan. However, having bad credit doesn’t necessarily mean you won’t get the loan. It depends on the creditor and why your credit score is bad. 

If your credit is bad, first understand the lender’s approval requirements. And also how they work with borrowers with bad credits. Qualifying for a loan doesn’t entirely rely on credit, but it does play a significant role. 

You can also search for ways to improve your credit score before applying. For example, you may get a lower-rate loan and use the funds to refinance student loan debt. But if you need the money now, a merchant cash advance or business credit card from other lenders may be your best choice.

However, keep in mind that you’ll pay lots of interest unless you pay your credit card balance in full before the interest starts accruing. 

3 Main Places To Get Dental Practice Loans 

1. Credit Unions And Banks 

Credit unions or banks should be your first place to search for a loan. Of course, you can acquire loans from anywhere as a loan for small businesses. But it’s better to look for lenders mainly designed for dentists. 

For example, You can be eligible for up to a maximum of $5 million if you choose the Bank of America Practice Solution Loan. You can use the practice loans offered by the Bank of America to consolidate debt or expand or acquire a current practice. 

Other banks such as Wells Fargo, Live Oak Bank, and other U.S. banks can help you get a loan for your business. 

2. Alternative Ways To Fund Your Dental Business 

Aside from banks and credit cards, you can try other available options, such as peer-to-peer lending, crowdfunding, and non-bank lenders. The non-bank lenders are those that don’t have full banking licenses. 

According to a recent study, non-bank funding alternatives for small businesses are on the increase. Almost 30% of businesses from the research said they applied with an online lender. This was an increase of 20% compared to the previous quarter. 

Usually, these lending options have few, if any, physical branches. This helps to reduce costs and quicken the application process by leveraging technology. If you want popular alternatives, check the below loan lenders: 

  • Kabbage 
  • Currency 
  • Funding Circle 
  • Blue Vine
  • OnDeck 

Please note: even though online lenders are convenient, it doesn’t necessarily mean they’re the right choice for you. The dental practice loan rate is essential. So you have to compare various loan terms and rates between traditional and non-traditional lenders. 

3. Consider Small Business Administration (SBA)

If you don’t prefer a loan from a bank or other options, consider the Small Business Administration. Technically, SBA isn’t a loan lender. However, when you get a loan from its partner networks, they guarantee it. 

The SBA guarantee limits the lender’s risk and makes it easier for you to get a loan for your dental practice. Also, these types of loans offer other benefits such as collateral requirements or lower down payments. 

To be eligible for an SBA loan, you must exhaust all alternatives, such as the banks and other options discussed above. You also need to meet the SBA’s small business size requirements. 

Here are some key facts you need to know about SBA loans: 

Loan amounts: from $5,000 to $5 million 

Repayment term: five to 25 years 

Dental practice loan rate: from 7.75% upwards 

What You Need To Know About Dental Practice Loan Refinance

With dental practice loan refinance, you can refinance your loans as a student loan refinance. That can help you reduce your monthly bills, free up cash flow, save you money, and make business operations easy. 

Here are essential things you need to know before refinancing your practice loan: 

1. Lenders Are Limited 

Refinancing your dental loan comes with several benefits. However, not all lenders offer dental practice loan refinance. Usually, you can refinance your dental loans at traditional banks and credit unions such as Bank of America Live Oak Bank. 

2. Origination Fees Can Increase 

You might be charged with an origination fee or other charges. But this will depend on the lender you choose. So pay attention, read all the terms and regulations, and always ask about the costs of refinancing loans. 

3. Underwriting Requirements Are Less Transparent 

Most lenders don’t publish their underwriting requirements online. And each lender comes with its requirements. For example, some consider the number of years or loan balance left to repay the original loan. 

Even though dental practice loan refinances might be an alternative, it doesn’t work for everyone. However, refinancing makes sense if you need funds for practice upgrades, are struggling to make monthly payments, or want to reduce your interest rate. 

Now, here are some benefits of refinancing your dental business loans. 

Benefits Of Refinancing Your Dental Business Loans 

dental practice loans

1. You Get Lower Interest Rates 

Getting lower rates is the most apparent refinancing benefit. Depending on your credit score and other factors, you might be eligible for a dental practice loan rate reduction which can save you thousands of dollars in interest charges over the student loan life. 

2. Reduced Monthly Loan Payments 

When you refinance your dental business loan, you get lower monthly payments, making the payments more manageable. But that will depend on your loan term. And the longer the refinance term, the more monthly installment payments you can make to pay back your loan. 

However, when you stretch your loan repayment to a long term, you get more interest charges over time. But you can manage your monthly payment amount. So you need to consider your ways before making a final decision. 

Make sure the decision you make is what’s best for you, not necessarily what’s convenient if you consider the long-term goals. 

3. You Get To Free Up Some Cash Flow 

Are you running a successful dental practice? That means you spend money on equipment and other expenses to help your business grow. You can save to fund your business growth when you refinance your loan. 

Also, the cash flow gives you more flexibility to make purchases for what your business needs. 

4. You May Get Tax Incentives 

Another benefit you get for refinancing is that the loans might be tax-deductible. The tax savings may be more than the added cost, even if the refinancing comes with a high origination fee. 

So you always have to make sure that you do your research. Also, consult a tax professional to make this benefit available to your particular situation. 

How To Choose The Right Dental Practice Loan 

If you want the best loan for your dental practice, it’ll depend on how good your credit score is. It’ll also depend on how you use the funds. If you have good credit and a well-laid business plan, the bank is the best option. 

If your loan application gets denied, you can opt for other alternatives. You can still secure a loan from online lenders or via the SBA loan. 

Cases That Can Help Lenders Loan You Money 

Knowing what you plan to use the loan for can help various lenders know whether or not to assist you. We’ll discuss some scenarios where you can get the loan. 

1. Establishing A New Dental Practice 

If you plan to start building your business from scratch, you may want to consider a dental business loan. And that’s because these loans begin with low or interest-only payments, which can reduce your expenses during the opening phases and initial construction. 

Some loan lenders will also release the funds over time, either by paying your contractors progress payments or to you. However, this can increase the amount of interest you have to pay.  

2. Purchasing A Dental Practice

You can buy a dental practice instead of building from scratch. But remember that it comes with its pros and cons. You can have instant cash flow if patients stay with the business after purchasing it.

However, you may also inherit potential equipment, staff, setup, and systems shortcomings. So you may want to search for a loan that covers equipment upgrades and renovations on top of the purchase price. 

2. Financing Dental Equipment 

It’s easier to acquire equipment loans compared to general practice loans. And that’s because you’ll regularly use equipment as collateral for the dental business loan. 

Some particular equipment loans may not be amortized, such as small business loans. That means the practice loan amount includes the financing charge. So you want to save money even if you pay the loan early in these situations. And that’s because the interest won’t accrue with time. 

Regardless, some creditors may offer a discount if you can repay in full and ahead of schedule. In addition, you can acquire a dental loan to purchase equipment or use a lease to rent the equipment. 

But you should consider the equipment’s maintenance, cost, and overall impact on your bottom line before you make a choice. 

If the equipment will make your practice more efficient and profitable over time, it’s probably a good idea to purchase it with a loan. 

3. Replacing Dental Office Equipment 

Office equipment isn’t as costly as medical equipment. So you could compare numerous loan options if you want to upgrade your offices’ printers and computers. For example, an online loan may offer straightforward financing. 

If you already have a creditor, you could ask about alternatives for replacing or upgrading your office equipment. 

4. Investing In Dental Software 

From PMS (practice management software) to general payroll and accounting services, your technological needs will change as your practice grows. 

Before you make a purchase, it’s ideal to involve your whole team. That will ensure that the new software will work with the existing setup. In addition, the loan can help purchase the software itself, and you may also want to consider setting money aside for training.

For example, if you’re changing accounting software, it may be necessary to hire a bookkeeper or accountant to move your books to the new system. 

Final Thoughts 

If you’re in dire need of dental practice loans, you can get them. However, you need to take your time and research before you begin. You can use this guide as the first step of your research. Now, when it comes to choosing the right financing options if you compare them. Don’t choose the one that seems convenient. And that’s because it can be suitable now, but worse later. Convenience is good, but also consider the long-term of your business. So we recommend you consult an expert who can help you make the right decision.