Compare dental practice loans

How much will a dental office cost?

Overall, expect to invest around $500,000 to open a dental office. Cut costs by limiting the size of your office and starting small, but there are some expenses — like equipment and software — that you'll need to manage 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. Plus, consider the salaries for 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.

If you're an experienced dentist looking for a new, state-of-the-art space, you could certainly finance this amount. But dentists with limited business ownership experience likely won’t qualify. Instead, it may be better to work with a landlord and lease a smaller office space when you’re first starting out.

What loan options are available to finance my dental practice?

You likely won’t be able to finance your dental practice with a single loan, but you can find a variety of loans that can cover all the expenses that come with running your own business.

Small Business Administration (SBA) loans

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

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 financing

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

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.

Merchant cash advances

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.

What other costs will I need to consider as a dentist?

Beyond equipment and general costs, keep these common costs in mind when determining how much funding your practice needs.

• Rent or mortgage costs. Ongoing costs associated with your rented — or purchased — space will constantly need to be accounted for. Monthly payments for your space, along with taxes, fees and utility costs, may need to be covered with a loan from time to time.
• Software and electronics. Processing payments, scheduling appointments and managing your practice will be critical. Invest in the right technology so you can keep your practice state-of-the-art and help patients and employees stay happy.
• Employees. Depending on the size of your practice, you will need at least two or three additional employees to manage the front desk, assist you in your practice and clean your office space.
• Liability insurance. This goes without saying, but if you don’t keep up with your insurance, you risk your business and ability to practice dentistry.
• Additional training. To ensure you and your employees stay up-to-date on new procedures, methods and technology, dedicate a portion of your budget to training costs.

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.

How do I qualify?

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.

• Business plan. Your business plan should address how you plan on building your business, your ideal market and projections for your future revenue and expenses. It may also be helpful to outline how this funding will impact your dental practice — or what you’ve done to prepare for business ownership if you’re starting a new practice.
• Experience. Recent graduates or dentists without much experience will find it harder to qualify for a business loan. A lender will look for experience in the field and as a business owner. If you don’t have much of either, you may need to consider alternative sources of funding or hold off until you’ve advanced professionally.
• Location. If you plan on opening a new practice or moving to a new office space, your location will be considered. Ties to the community — along with general need in the area — might sway your lender on your application. Businesses that have established clientele may fare better when they apply.
• Credit score. Your personal credit score will play a role in most business loans because you will likely be required to provide a personal guarantee on the loan. If you currently own a dental practice, its business credit score may also be used to determine if you know how to manage your finances.

What will I need to apply?

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

• Your business plan
• Personal banking and income documents
• Business revenue documents
• Your dental and DEA license
• A statement of your personal net worth
• Details of what the loan is for and how much you need

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 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 loan types out there that can be used to fund a dental practice. 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. 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. Dental lenders understand that you have debt because of school, but they'll only lend to you if you're 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 life insurance and disability insurance. Check for malpractice insurance requirements as well.

Have a business in another industry?

Bottom line

When you’re looking to start or grow your dental practice, you want the best 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.

Frequently asked questions

How long does it take to get financing?

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 days, whereas a traditional loan can take weeks to see your funds.

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

Traditional bank loans for large amounts often require excellent credit scores of 720 or higher for the best rates. You can be approved for a loan with a score that’s below 720, but your rate may not be as competitive and the lender may require more extensive documentation for approval.

Which lenders offer customized financing?

Not all lenders are able to create a package that is fully tailored to your needs. although it’s likely you’ll be able to find a tailored business loan that fits your needs. But if not, there are general purpose business loans.

How will student debt affect my ability to get a loan?

Lenders that specialize in financing medical professionals like dentists understand that student debt is often inevitable. Provided you have a strong business plan and a few years of experience under your belt, you will likely still be able to qualify for a loan even with student debt.