Dental practice financing can be overwhelming for a new doctor just starting out.
Dentists didn’t spend years of training at dental school to then be burdened with accounting and cash flow issues. But the reality is that dentists – particularly ones that are just starting out – often are cash poor when they first begin practicing. Many of them are saddled with loans from their undergraduate studies and, later, their dental degrees.
According to the American Dental Education Association (ADEA), the average dental school debt for a graduating student was $287,331 for the class of 2017. In fact, the ADEA reports that 30 percent of dental school graduates owe more than $300,000. With that kind of debt piled up, it can take up to a decade to pay it all back, depending on the success of the dentist and his or her practice.
Fortunately, dentistry is a line of work that is relatively high paying, and dental school graduates have a strong reputation for timely repayment. Many dentists start out with an annual salary of over $100,000. Many dentists look to pay off the expenses of their education quickly. By living frugally in the beginning, dentists can reduce their student debt more quickly.
Running a practice involves more than just treating patients, which is what most dental professionals want to do. With any business comes the challenges of overseeing the operation as well as managing the finances: office rent or building mortgage, insurance, utilities, staffing, inventory, and other costs. Fear of high startup and operating costs should not hold you back.
Whether you are a recent dental school graduate or a seasoned professional, securing dental practice financing is not out of reach. There are hundreds of different financing options available to dental professionals; it’s just a matter of finding the right small business loan.
There are many different dental practice financing needs, such as:
- Dental acquisition financing (loans to pay for the purchase of an existing practice)
- New practice loans (startup capital)
- Expansion, improvement, and/or relocation of an existing practice
- Commercial real estate purchases
- Equipment loans
- Debt consolidation
Whatever the financing need might be, here are three tips to keep in mind when trying to secure loans for dentists:
- Conduct your research
If you have recently graduated from dental school and are looking to branch out on your own by opening a new practice, the challenges will be significant. You will have to build a client base from scratch and will not yet have proven a track record of financial success. Do your research. If you know a particular marketplace is in need of dentists or somehow have a client base locked in – such as a relationship with school system or other entities that can direct multiple clients your way – then the chances for success increase.One thing to consider is looking to take over an existing practice. It is not uncommon for a dentist who has been successful for decades to then have to close the practice because his or her children do not decide to follow their footsteps in the family business. According to the Census Bureau, an estimated 20 percent of the U.S. population is now over age 65, and the country is expected to experience considerable growth in its older population through 2050, when the population aged 65 and over is projected to be 83.7 million, almost double its 43.1 million figure in 2012. As more dentists retire, younger practitioners are needed to replace them.Taking over an existing practice from a soon-to-be retiree could be the easiest and most lucrative way forward. In such cases, a business acquisition loan could be the best way forward.
- Start with writing a good business plan.
Whether you are a dentist or other type of medical professional, caterer, landscaper or involved in some other industry, having a solid business plan is critical to securing dental practice financing. The business plan provides a roadmap for success. Be sure to include a market analysis that determines if a particular area is already saturated with dentists. If this is the case, it will be more challenging to be successful.The elements of an effective business plan include:
- Executive Summary: A one-page explanation of the business.
- Business Description: Explanation of the practice and how it will operate.
- Target Market and Competitive Landscape: An objective analysis of the market in which the business will compete.
- Product or Service: Details of the service offerings: cleanings, fillings, root canals, extractions, crowns, and implants, as well as specializations including children’s dentistry and cosmetic dentistry services, such as whitening.
- Sales, Marketing and Promotion: Explain how you will inform the local marketplace about your practice (website, social media, traditional advertising and public relations activities, etc.).
- Management: Write brief bios of the partner(s) and key employees of the practice.
- Financial Data: Work with your accountant to provide tax documents, as well as a break-even analysis and cash flow projections, along with sample balance sheets and profit-and-loss statements. Local SBA offices also can provide assistance in putting together this part of the business plan.
- Investment: Detail how much money each partner will put into the practice. Lenders want to know that borrowers are willing to put their own money into the venture.
- Appendices: Include logos, photographs and other imagery, and video links.
- Complete the loan application
The one of the most common reasons for business loan rejections is because the application is incomplete. For instance, without tax documents, the bank will not be able to process the application. Be sure to have all the relevant supporting financial information. Otherwise, the funding request will be denied.