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The Best Dental Practice Loan Options for Financing Your Office

Sally Lauckner

Sally is the managing editor at Fundera. Previously, she was a senior editor at SmartAsset, a personal finance startup, and has held various editorial roles at the Huffington Post and AOL.com. She is passionate about financial literacy and educating small business owners.

Whether you’re a new dental school graduate eager to start your career, a seasoned veteran expanding an existing dental practice, or considering a move from a salaried role to start a practice of your own—the financial side of managing a successful dental practice can be equally intimidating.

After all, dental school taught you about serving your patients and maintaining their optimal oral health. You likely learned very little about sustaining a healthy business. And nowhere is this sense of financial uncertainty more evident than during the search for a dental practice loan.

For one thing, the prospect of additional debt is daunting, especially given that the average student loan debt per graduating dentist is an astounding $287,331. Given this existing debt, will you even qualify for a new loan to start or grow your dental practice? And if you do, how will you know which form of dental office financing makes sense for your practice?

If you find yourself asking these questions, we are here to guide you through the various options available for dental practice financing so you can find the best funding option for your needs.

The Best Dental Practice Loans for Your Office

Here is the good news for dentists seeking financing: Dental practice loans are widely considered a good investment by lenders, meaning you have a strong chance of qualifying compared to other types of business loans.

Better yet, many lending institutions even have special divisions dedicated to understanding the unique borrowing needs of dentists and other medical specialists, including the circumstances surrounding student loans.

To help you navigate your options and find the best dental office loan for your needs, let’s walk through the five best available solutions:

1. SBA Loan Options for Dental Office Financing

Across almost every industry, traditional term loans offered through the U.S. Small Business Administration’s various loan guarantee programs—known universally as SBA loans—are revered as the best of the best in the business loans market. Through these programs, the SBA partners with local intermediary lenders—typically traditional brick-and-mortar banks—to guarantee up to 85% of loans funded to small business owners. With this guarantee, banks can fund small business loans for larger amounts and at lower rates than their risk calculations would otherwise allow.

The SBA 7(a) loan program provides a particularly strong fit for dental practice financing due to its great terms and wide flexibility in the use of funds.

Here are the quick facts you need to know about SBA 7(a) loans for your dental office:

  • Loan Amounts: $5,000 to $5 million
  • Repayment Term: Five to 25 years
  • Interest Rates: Starting at 6.75%
  • Time for Approval: Three weeks to several months

As you’ll note above, a major downside of working through the SBA’s loan programs for a dental office loan is a relatively long time for approval, which can delay your timeline.

And keep in mind that the application process for SBA 7(a) loans is rigorous and highly selective. You should expect to provide extensive documentation about your business and prepare for many rounds of back-and-forth with both the SBA and your intermediary lender before learning whether your loan application is approved.

2. Bank Loans to Finance Your Dental Practice

When you need a business loan, shouldn’t the bank where you already manage your business finances be the obvious choice? For dentists, this simple solution may, in fact, be the right one.

That’s because, even as business borrowers across other sectors lament that traditional bank loans carry near-impossible qualification standards, dentists tend to have better-than-average success with bank financing. Institutions including Bank of America, Wells Fargo, and U.S. Bank even have resources and specialists dedicated to meeting the unique needs of dentists and other health care providers, including relationships with the American Dental Association and other groups to offer reduced fees and other special dispensation for members.

Here are the quick facts you need to know about term dental office loans from traditional banks:

  • Loan Amounts: $30,000 to $5 million
  • Repayment Term: Up to 10 years
  • Interest Rates: Starting at 7%
  • Time for Approval: Two to six weeks

As traditional banks offer an array of options for dental practice financing, the exact terms of your dental office loan may vary based on your loan’s purpose, amount, and term—as well as your financial situation. If you have decent credit (i.e. a FICO personal credit score of 620 or above) and are interested in traditional bank financing, start with a phone call to your bank’s practice financing specialist to learn more about your options.

3. Short-Term and Medium-Term Loans for Dental Office Financing

For those seeking a large sum of funds to start or expand a dental practice, there’s little substitute for the customized practice solutions and enviable interest rates offered by banks’ dental practice financing specialists.

But if what you really need is fast access to cash with as little paperwork as possible, you’ll likely be better served by a short-term or medium-term loan from an online lender such as Kabbage, Funding Circle, or OnDeck.

These loan options come with pros and cons: They are more expensive than the other options on our list and come with a shorter repayment period. At the same time, they can provide cash in hand within as little as one business day after a simple 20-minute application—even for borrowers with poor credit. For busy dentists facing immediate cash-flow challenges, there is little substitute for this level of convenience.

Here‘s what you need to know about short-term loans and medium-term loans from online alternative lenders:

  • Loan Amounts: $2,500 to $250,000
  • Repayment Term: Three to 18 months
  • Interest Rates: Starting at 10%
  • Time for Approval: As fast as one business day

With these rates and terms, short-term loans shouldn’t be used to fully finance your dental practice. But if you’re busy, aren’t worried about repayment, and just need cash quickly, these dental office loans are a convenient solution.

4. Business Lines of Credit for Dental Practice Working Capital

When it comes to convenient financing, getting cash in hand quickly isn’t the only need dentists face. As you deal with the uncertainty of costs related to your dental practice, what if you aren’t entirely sure how much financing you’ll need—or exactly when costs will arise?

Business lines of credit are specifically designed to address these circumstances. Similar to a traditional credit card, approval for a business line of credit gives you access to funds up to a set maximum amount, while you’re required to pay interest only on the funds you actually withdraw.

Imagine, for example, that you obtain a line of credit of $50,000 to meet the needs of your dental office. At first, though, you only need to withdraw $5,000 for immediate expenses. Even though the full amount is available to you should you need it, you’re only required to pay interest on that $5,000 while it’s withdrawn. And best of all? Funds are replenished once you repay what you’ve borrowed, so you can re-use the same line of funds over and over again.

These are the terms you can expect when seeking a business line of credit for your dental office:

  • Loan Amounts: $10,000 to $1 million
  • Repayment Term: Six months to five years
  • Interest Rates: 7% to 25%
  • Time for Approval: As fast as one business day

Since there’s no cost associated with a business line of credit until you actually use the funds, this dental practice financing option might be worth pursuing even if you have no immediate need for a dental practice loan. That way, you can take your time shopping around for the best possible rates and terms, then rest easy with the peace of mind that funds are available when you need them.

5. Dental Equipment Financing

From dental chairs and lighting to X-ray equipment, basic instruments, and even office computers—equipment purchases represent a significant portion of the total startup costs for any dental practice. This is just one of many reasons why a special type of dental office loan, known as dental equipment financing, has become the ideal choice for many dentists.

Another standout factor? Equipment financing is far more readily accessible for dentists with bad personal credit, and because the equipment itself can be used to secure the value of the loan, you likely won’t be asked to offer up additional personal collateral.

Let’s take a look at the numbers behind dental equipment financing:

  • Loan Amounts: Depends on the cost of equipment
  • Repayment Term: Six months to five years
  • Interest Rates: Starting at 6%
  • Time for Approval: As fast as one business day

Of course, if you’re opening a new dental practice, equipment purchases won’t be your only significant expense. Even so, dental equipment financing does cover one area of significant need and may even be combined with other forms of financing in order to fully fund your dental practice.

dental-practice-loans

How to Choose the Right Dental Practice Financing Option

Now that you know more about the various dental practice loan options available to your business, you’re left with an obvious question: How do you choose what’s right for you?

The answer here will depend on your financial circumstances, your credit history, how quickly you need funds in hand, and how you plan to use the funds you borrow.

Are you forming a long-term plan to start a new dental office, acquire an existing practice, or expand to a larger location? Provided you have strong credit, you should look no further than a low-interest bank or SBA loan.

Do you have an immediate need to meet payroll or other expenses? A short-term loan would be the natural fit.

If you want the availability of financing for ongoing working capital needs but aren’t sure exactly how or when you’ll use the funds, a business line of credit provides the ideal solution.

And of course, don’t overlook the possibility of combining multiple forms of dental practice financing to create a customized funding solution.

As a dentist, you have focused your career first and foremost on the health care needs of your patients. Don’t forget, though, that getting the financing you need to sustain your dental practice is key to continuing to provide great service for years to come.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Sally Lauckner

Sally is the managing editor at Fundera. Previously, she was a senior editor at SmartAsset, a personal finance startup, and has held various editorial roles at the Huffington Post and AOL.com. She is passionate about financial literacy and educating small business owners.

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