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Dentist Business Loans & Dental Practice Financing

Financing For Dental Practices

Whether you love going to the dentist or absolutely dread it, going to see a dental professional is unavoidable – that is, of course, if you prefer excellent oral health and keeping your natural teeth! Unfortunately, there is a giant stigma about dentists and the fears associated with seeing a dentist, which typically results in patients only seeing a dentist in dire circumstances; often when a patient starts to experience terrible pain. However, most people forget the importance of a dental visit and having their mouth regularly inspected. Having regular dental visits is incredibly important in diagnosing, treating, and preventing severe conditions.

Many dental practices focus on a team approach, which consists of an entire medical practice team focusing on continuity of care that is comprehensive, convenient, efficient, and cost effective. The role of a general dentist generally includes diagnosing oral diseases, promoting oral health and disease prevention, creating treatment plans to maintain and/or restore oral health, taking and interpreting x-rays and other diagnostic tests, ensuring the safe administration of anesthetics if needed, monitoring growth and development of the teeth and jaw, and preforming surgical procedures when needed. A lot of these sound scary to many patients, but remembering that dentists are simply doctors for overall oral health similar to a general physician doctor who people see for regular checkups!

Dentists, just like other doctors, receive a high and intensive level of education and clinical training that require a high academic standard. Most dental students earn a Bachelor of Science degree (or their equivalent), as well as rigorous admission examinations. After obtaining a Bachelor degree, dental students must complete biomedical science courses similar to traditional doctors: anatomy, biochemistry, physiology, microbiology, immunology, and pathology. After all of this rigorous course work, dental students must then focus on clinical practice to complete undergraduate and dental degrees. But the level of education does not stop there! Dentists often continue their education and training throughout their career as more and more advanced methods for effective dentistry emerge.

Dental Industry Information and Statistics

The dental industry has seen constant growth in the past few years and is expected to continue to boom in the future. Overall, private dental clinics is the United States most profitable industry today. As of 2015, there were 195,722 dentists working in the dental industry, with around 28 percent being female dentists and 20.9 percent being ADA (American Dental Association) recognized dental specialists. There is a huge increase in the amount of people graduating from dental school in the last few years, mainly in part to the large amount of Baby Boomer’s retiring – younger generations are starting to capitalize on the dental industry. It is expected that the per capita supply of dentists in the United States will continue to increase well into 2035. However, many older dentists that are not quite ready to retire are having difficulties transitioning into the new age of dentistry; or more specifically, the technological revolution that is shifting the dental industry. There is also the concern that even with the large increase in people entering the dental field, there will not be enough dentists to meet the increased population needs of the United States. Basically, there is a growing demand for more and more dentists in the country today, however to stay ahead of the competition in this incredibly diverse market, dental businesses need to be focusing on the emerging trends that are revolutionizing the dental industry today.

Dental Industry Trends

The dental industry is experiencing a multitude of shifts today that are changing the effectiveness of dentistry. The continuously changing healthcare market is drastically effecting the dental industry and the affordability of the procedures for many individuals, as well as the technological trends that are now becoming a necessity for all dental practices. In order for dentists to maximize their patient retention and patient generation, it is vital for all dental businesses to stay on top of the constantly evolving dental industry trends.

  • Group practices are starting to dominate the dental industry. In the past, dentists typically opened up solo practices with a partner or two, resulting in 86 percent of dentists practicing solo; but this number has ben shrinking more and more every year. A major contributing factor to this sudden change is the amount of student loan debt that graduating dentists are currently dealing with; this leads to more new dentists favoring group practices over establishing a new solo practice.
  • Health insurance factors, predominately the Affordable Care Act, have lead to 8.7 million children gaining dental insurance by 2018. This means that children without dental benefits has been reduced to 55 percent, but it is not required for insurances to include dental benefits into health insurance plans for adults. There is still a lot of factors up in the air with health care, so staying updated on new policies is a priority for all dental practices.
  • Utilizing reviews when picking a new dentist or specialist, so making sure that online reputation is a priority in the dental industry is essential. In addition to online reputation, dental practices that are not creating efficient websites and mobile websites will suffer.Technology is affecting so many areas of the dental field, so to stay competitive in this diverse industry, dental practices that are adopting new dental technologies will thrive. Some of the new technologies that dental practices need to be transitioning into are: softwares for managing, scheduling, and recording patient’s and their records, CAD/CAM technologies, guided surgeries, 3D ConeBeam imaging, and electronic statements and insurance claims. There are many other necessary technologies that many successful dental businesses are currently using, so focusing on this transition is vital.
  • Attracting new patients and retaining current patients is a struggle felt by many dentists today. The competition in the dental industry is too strong to have average assistants, weak customer service, and terrible marketing. Now more than ever, customers are demanding a great experience with phenomenal customer service, so if a dental practice wants to see reoccurring patients and gaining new patients, then making customer service and quality care the number one priority is essential.

Reasons a Dentistry May Need Financing

There are a number of reasons a dental practice — just like every other business — would need financing for both short-term needs but also to help with the long-term growth plan. Financing uses include:

  • Working capital: As with most companies, dentists find themselves from time to time needing additional working capital to make sure they can pay for day-to-day operations.
  • Payroll: All dental offices have multiple employees that require being paid every week or every two weeks. Not being able to make payroll is simply not an option. When a dentist finds that they are waiting for multiple insurance payments and need financing to bridge financial commitments, payroll funding is usually needed.
  • Refinancing debt: Most companies take on debt from time to time to fund their business. After a while the dental office may find itself in a better position to refinance or consolidate debt and to help lower or spread-out payments.
  • Commercial real estate purchase: many dentists lease their commercial space. But others may find an opportunity to purchase the real estate they use. During those times a dental practice may look for a traditional or SBA real estate loan.
  • Marketing: all businesses need to make consumers and potential customers/clients aware of their services. With that having been said, advertising and marketing requires financing (sometimes substantial).

Types of Dental Practice Loans

Types Rates Terms Funding
Bank 6-10% 3-7 years 14-30 days
SBA 6-10% 3-7 years 10-30 days
Line of Credit 5-15% 1 – 3 years 7-30 days
Alternative 6-25% 1-5 years 5-7 days
 Cash Advance 1.16-1.55 3-24 months 1-3 days
Equipment Lease 6-20% 1 – 7 years 7-30 days

Dental Practice Bank Loans

If you own a dental practice with great credit and established profitability, then traditional bank financing is without the doubt the cheapest and most affordable form of commercial financing. With that having been said, banks aren’t willing to take much of a risk, so your business credit must be stellar, and your financials need to be in good shape.

  • Rates: 5-10%
  • Terms: 1-25 years

SBA Dentistry Loans

If you’ve tried the traditional route (through a bank or credit union) and they’ve turned you down for whatever reason, the next best option may be SBA financing. SBA loans to dentists are simply traditional bank loans in which the Small Business Administration will guarantee a major portion of the loan. By providing this guarantee it helps nudge the lenders to agree to financing, knowing that their risk is much-reduced. But even with  the guarantee the dentistry must have good credit, cash-flow, revenue and profitability. SBA financing comes in both term loans and lines of credit.

  • Rates: 6-8%
  • Terms: 3-25 years

Alternative Dental Practice Loans

Obtaining traditional or SBA financing is never easy. If you’ve spent considerable time trying to secure traditional loans but have had no success, a way to obtain needed capital may be to try an alternative business loan. Alternative lenders have lower credit and profitability requirements than banks, and can fund the capital within days, without lots of paperwork. With that having been said, alternative loans are more expensive than traditional dental financing. In fact, the rates may be twice or even three times that of a bank. So in exchange for quick funding, you can expect a much higher rate.

  • Rates: 9-25%
  • Terms: 1-5 years

Asset Based Dental Office Financing

So say you’re having difficulty obtain both traditional and non traditional business loans, but own either your commercial real estate or have personal real estate with equity. You can tap that equity by obtaining an asset based loan using your real estate as collateral — even if you have a 1st or 2nd mortgage on the property. While the rates aren’t the greatest, it is an option should you need to tap into that equity to help your company grow or bridge obligations.

  • Rates: 8-25%
  • Terms: 6 months – 3 years

Dental Office Equipment Leasing

Dental office equipment is never cheap. In fact, some of the dentistry equipment can be very expensive — even too expensive to buy outright. Sometimes getting a loan to purchase the equipment would be a good idea to obtain the machinery and equipment. But if you do use that loan to purchase the equipment, there’s a good chance it could be outdated in no time at all. So a way to obtain the equipment without being stuck with it when new innovations and technologies comes around is to lease the equipment (lender purchases equipment and then leases to dental office for period of time) may make sense.

  • Rates: 6-15%
  • Terms: 1-10 years

Dental Office Cash Advances

There are usually two reasons a company takes a cash advance: bad credit, or emergency needs. Cash advances are the sale of a dental offices future earnings in return for immediate cash at a discount to the lender. A merchant cash advance (MCA) is the sale of the dentistry’s credit card sales. An ACH cash advance is the sale of the dental office’s future bank account deposits.

  • Factor Rates: 1.16-1.50%
  • Terms: 4 months – 2 years

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