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Opening a dental practice is an expensive task. You have to find a space to house your practice, hire employees, outfit your offices and spend valuable time on marketing to get new patients through the door.
And if you’re a recent graduate with debt? Things can be even harder. Fortunately, there are a number of business loan options available.
Overall, expect to invest around $500,000 to open a dental office. You can cut costs by limiting the size of your office and starting small, but there are some expenses — like equipment and software — that will need to be dealt with no matter how large or small your practice is.
The American Dental Association (ADA) states that normal equipment, supplies, legal consultation and initial marketing can add up to an additional $250,000 or more for most dentists. You’ll also need to consider the salaries of your employees and yourself when factoring in startup costs.
Additionally, the cost of opening a dental office will depend on your location. If you plan on buying land and starting from scratch, property and construction can cost upwards of $250,000.
You can certainly finance this amount if you’re an experienced dentist looking for a new, state-of-the-art space. But dentists with limited business ownership experience likely won’t qualify for this amount. Instead, it may be better to work with a landlord and lease a smaller office space when you’re first starting out.
You likely won’t be able to finance your dental practice with just one loan, but you can find a variety of loans that can cover all the expenses that come with running your own business.
Dentists at every stage of their career may be able to qualify for a loan through the SBA program — although more experienced dentists with established practices are more likely to qualify. These are typically long-term options meant for expanding your practice and covering normal business costs like new equipment, employee training and other overhead expenses.
But while they offer some of the most competitive terms out there, the long turnaround may mean you’ll need to secure additional funding while waiting to be approved. Plus, one of the requirements to qualify is to exhaust your other options which means you’ll have to apply for other financing before you’re eligible.
Term loans are an ideal choice for set expenses needed to run or grow your business. While the exact loan amount varies, you won’t need to rely on a bank to score a good rate — you can find financing options with online and other nontraditional lenders.
And best of all, there are lenders that work specifically with dentists to fund their practices. This means you could potentially build a long-term relationship with a lender that could benefit your practice for years to come.
Equipment loans are secured by the equipment you buy. This makes furnishing your office and dental suites less expensive overall — if you default, the lender will have a quick way to recoup some of its losses and will likely offer a lower rate than an unsecured loan. It also allows you to finance and spread out the total cost over multiple years while you work on expanding your business.
Lines of credit are designed to be used and repaid multiple times. In general, these are best for regularly occurring expenses.
They’re typically cheaper than business credit cards, but may be more difficult to qualify for. And like term loans, there are specialized lenders that work with dental practices so you can rely on a lender that understands your business and can work with you to find the best terms possible.
If your dental practice processes credit card payments, merchant cash advances allow you to get an advance on your revenue. Because of the high fees associated with borrowing — and the short loan term — merchant cash advances aren’t the best choice for normal business expenses. Instead, they are best used as a short-term solution to a drop in cash flow that will quickly be recouped.
Beyond equipment and general costs, keep these common costs in mind when determining how much funding your practice needs.
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.
Every lender has its own criteria, so while you may qualify for some loans, you may not qualify for others. However, keeping these points in mind will help ensure your application is strong.
While requirements vary based on the lender, here are few basic details you can expect to provide:
Source: Patient News
When you’re looking to start or grow your dental practice, you want the best that you can get. Carefully research your options based on your business plan, and don’t be afraid to compare a variety of loan options to see what kind of offers you might qualify for.
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