Compare business loans for dental practices

What business loans for dental practices are available?

You may not be able to finance your dental practice with just one loan, but you can find a variety of business loans for dental practices that can cover all the expenses that come with running your own business, such as:

Commercial mortgage

Purchasing an office space may be one of the single most expensive costs to starting or acquiring a practice. Fortunately, you can take out a commercial mortgage, which will be secured by the property itself.

• Pay the loan back in monthly installments (with interest and fees)
• Terms range from 1 to 25 years
• Loan-to-value ratios range from 75 – 85%

Equipment financing

Furnishing multiple dental suites can be an expensive task, especially when you’re just starting out. Equipment financing will allow you to finance and spread out the total cost over multiple years while you work on expanding your business.

• Interest rates range from 5% to 20%+
• Your equipment is collateral, so you could lose it if you can’t repay your loan

CSBFP loan

Many dental practices qualify as small businesses, which means yours might be eligible for a Canada Small Business Finance Program (CSBFP) loan. These loans are partially backed by the federal government. You’ll need an exceptional business plan and good personal credit.

• Borrow up to $1,150,000 (max $150,000 for lines of credit)
• Registration fee of 2% of the loan amount
• The maximum interest rate is the lender’s prime lending rate + 3% for term loans and the lender’s prime lending rate + 5% for lines of credit

Business line of credit

Similar to a credit card, a business line of credit allows you to borrow a certain amount, repay it and borrow again. This gives you flexible capital you can use for most business expenses, like purchasing equipment or expanding your practice.

• Borrow $5,000 to $1 million
• Pay 9% to 39.99% interest on the amount you actually use

Merchant cash advance

A merchant cash advance gives you an advance on future patient payments. Lenders will give you a lump sum, which you then repay using a percentage of your daily sales.

• Pay a fixed fee (known as a factor rate) ranging from 1.1 to 1.5
• Receive funding within a few days
• Loan amounts range from $500 to $500,000

Business term loan

There are also standard business term loans that can be used for just about any legitimate business expense that may fall outside of the specialized options above.

• Most business term loans are between $500 to $500,000, but some go up to $1.25 million
• Choose from fixed or variable interest rates between 4% and 39.99%
• Terms range from 6 months to 20 years

Representative example: Tasha renovates her dental practice

Tasha has been growing her dental practice for years and thinks it’s time to give her office a solid makeover. Additionally, some of Tasha’s old equipment needs to be replaced, and she wants to hire another staff member to help handle her now-robust patient list. Altogether, her plans will cost around $50,000.00.

Tasha applies for a business loan from an online lender and is approved with competitive terms, thanks to her solid personal and business credit scores and the financial strength of her practice. She signs the loan agreement and submits the required documentation. Soon, the funds will be deposited into her bank account.

*The information in this example, including rates, fees and terms, is provided as a representative transaction. The actual cost of the product may vary depending on the lender, the borrower’s financial situation and other factors.

What if I want to purchase a dental practice?

Buying a practice is a viable option for some, but it often comes with a high cost—you’ll be paying for the name of the business and the clients on top of all the equipment and space. Fortunately, there are multiple ways to go about buying a dental practice.

Financing can come from one of two sources: the seller or a third party. In either case, you’ll need to provide a good deal of information. Your resume, annual income and credit score are just a few of the items you may need.

The purchase of an existing practice is also separate from the purchase of upgraded equipment—or real estate, if you plan on buying the location. Talk with your advisers in detail about your wants and needs so that they can assist you with determining what’s feasible.

What will I need to apply?

While requirements vary based on the lender, here are a few basic details you can expect to provide:

• Your business plan
• Personal banking and income documents
• Business revenue documents
• Your National Dental Examining Board of Canada (NDEB) certification and provincial or territorial license
• A statement of your personal net worth
• Details of what the loan is for and how much you need
• Government-issued ID
• Business details (business name, address, licence number)

Dental practice business tips to keep in mind

• Do your research. There are a lot of variables to calculate when you’re starting a business. Do you know what other practices are doing? Do you know which areas need dentists the most? These and other factors are important to hammer out before you apply for a loan.
• Know your loan. Likewise, there are a variety of business loans for dental practices out there that you can consider. Know the type of loan you need, how much you need and what you’ll have to submit so you have the best chance of approval.
• Select trusted advisers. Dental school may not have provided adequate business lessons to run your own practice. Even if you have some business background, it can greatly benefit you and your practice to maintain a working relationship with specialized professionals.
• Plan, plan, plan. You should talk with the advisers you select, draw up your business plan and continue to refine it. It can also help to make sure your budget is lined up for worst-case scenarios, taking into account any future projects.
• Pay your bills on time. Keeping up with your finances keeps your overall creditworthiness in check, which can assist your chances of acquiring a loan. Lenders understand that you have debt because of school, but they won’t lend to you if you aren’t responsible with your money.
• Know your limits. Part of budgeting is knowing your limits. Carefully calculate—and recalculate—those financial limits to ensure you have solid numbers on your business cash flow.
• Maintain your insurance. Your practice largely depends on your well-being for success, and so a big chunk of business lenders will require you to have fire insurance, life insurance, liability insurance and disability insurance. Check for malpractice insurance requirements as well.

Bottom line

When you’re looking to start or grow your dental practice, you want the best that you can get. Business loans for dental practices come in many different forms, with conditions and terms that vary depending on your needs. Carefully research your options based on your business plan, and don’t be afraid to compare business loans to see what kind of offers you might qualify for.

Frequently asked questions

• How long does it take to get financed?

  It depends on the type of financing you’re seeking and the lender. If you’re just looking for a short-term solution, it could be a matter of hours or days, whereas a traditional loan can take weeks to see your funds.

• What kind of credit score do I need to get a traditional bank loan?

  Most lenders consider a credit score of 660 or higher to be good credit. You can be approved for a loan with a lower score, but your rate may not be as competitive, and the lender may require more extensive documentation for approval.

• Will I need insurance before I apply for a loan?

  Some lenders, especially banks, will require you to have proof of insurance before you apply for business loans for dental practices. But some lenders may allow you to submit a loan application on the condition that you’ll move quickly to get insured before the loan is approved.

• What can you use business loans for dental practices for?

  You can use business loans for dental practices for most business expenses, including:

  • New equipment and lab supplies
  • Commercial property
  • Marketing services
  • Office renovations
  • Hiring and training new employees
  • Licences and insurance
  • New services
  • Software
  • Coverage for delayed or denied insurance claims

To make sure you get accurate and helpful information, this guide has been edited by Leanne Escobal as part of our fact-checking process.

Written by

Rebecca Low

Writer

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Rebecca Low is a writer for Finder. She has contributed to a range of digital publications, including Wise, income.ca and Indeed, writing on topics like personal finance, career development, and travel. See full bio