Are you starting a new dental practice, or growing an existing one? Dental practice loans can be a great way to get the funds to move forward with your dental business goals.
Dental offices provide the largest percentage of employment in the industry by a large margin. There’s plenty of room for new practices in many communities, and starting a dental office allows you a lot of freedom. You’ll be able to meet your patients’ needs in the best way and hire a great team to work with you.
However, to make this dream a reality you need dental practice financing. Wondering how to get loans for dentists? In this guide, we’ll show you how — keep reading to learn more!
Types of Dental Practice Loans
What are your options for dental practice loans? Here are the financing sources that can help get your practice up and running.
When you get an installment loan, you’ll pay the amount back in the form of regular monthly payments. Part of these payment amounts goes to pay back the principal loan amount, while part of it goes toward paying interest.
When you sign the loan contract, you get access to the full amount of funds right away. If you repay these loans early, you generally don’t have to pay any penalties.
The terms of your installment loan depend on what you need it for. For example, you can get much more time to pay back a loan for real estate than a loan for the business cycle.
Line-of-credit loans are another one of the most common types of business loans that are ideal for a dental practice.
This loan is great for keeping cash flow up as you need it. You may not use a line of credit for large purchases, such as the cost of buying real estate. Instead, this loan allows you to have access to funds as you need them to keep your practice running smoothly.
This is a type of permanent loan arrangement that lets you take out and pay back funds as needed. You’ll be able to buy inventory, make payments, and meet other financial needs with a line of credit to tap into.
Lines of credit are effectively advancements of funds. The funds you need to get transferred to your practice’s bank account, and you’ll pay them off with interest over time. After you pay off the loan, the line of credit is still there when you need it in the future.
A secured loan involves using collateral to get the funds you need. For example, the value of your practice might be used to secure a loan.
These loans are a higher risk for you since you stand to lose whatever collateral you use if you can’t pay the loan back. However, in exchange, you usually get lower interest rates, since the bank isn’t taking such a big risk.
An unsecured loan doesn’t require collateral. Instead, the bank or lender will look at your business credit score, and possibly your personal credit score, to determine the terms of your loan. You’ll probably pay higher interest, but there’s less at stake.
Dental Practice Financing Application Tips
Wondering how to up the chances of getting approved for the loan you want? Use these tips when you apply.
1. Check Your Credit Score
Your business and personal credit scores can make a big difference in your chances of getting approved. If one or both of those scores are low, you might want to work to raise it before completing the application. Your loan can also affect your credit score once you get it — learn more here.
2. Know Your Business Risks
All new businesses have risks. If you know the risks of opening your own dental practice, you’ll know what the lender is thinking about when they look at your application. If you can show you understand the risks, you might have a better chance of getting approved.
3. Get to Know the Loan Officers
If you can forge a working relationship with loan officers, they might help you get the loan you want.
They actually have more power than you might think at first. If you can get them on your side, they might pull the right strings to get your loan moving forward.
4. Have a Great Business Plan
The quality of your business plan matters! Write a thorough, traditional business plan for a new practice, and have it ready before approaching lenders. Make sure to be detailed and specific, especially about the financial projections and financing request.
5. Mention Your Past Successes
If you have an existing practice, or any successful past business ventures, mention those to the lender. The more you can show that you know how to succeed, the more comfortable a bank will feel lending to you. Show them what worked in your past, and how you’ll bring those skills into this new project.
What Makes Loans in the Dental Industry Unique
Each industry is unique when it comes to getting financing, and the dental industry is no exception.
The unique factors of the dental industry actually tend to work in your favor. To most banks, a dental practice is a low-risk investment. Dentists tend to be good about paying back business loans because it’s a very profitable business.
That said, it might be worth your time to seek out a lender that specializes in the dental industry. Although many lenders may be willing to lend to you, it’s good to work with one that understands the specifics of the industry.
Getting the Best Deal on Your Practice Financing
No matter what you need your dental practice loans for, you want to get the best deal from lenders. Follow our tips above to get started, then compare loans from different sources to choose the best deal for your needs.
If you’re opening a new practice or expanding an existing one, you’ll want to hire a tax accountant to help with your finances. Check out our guide to finding the right accountant here.