Starting a Dental Practice: Helpful Financing Tips & Options
April 22, 2022
Did you know that roughly 77% of dentists own their own practice? Starting and running your own dental practice can be quite exciting; after all, this is something you’ve been working towards for several years! However, you might have a few questions about financing a practice. Keep reading to learn more about some tips and options for supporting your new practice to ensure that you’re set up for long-term success.
Choose a Career Path
Although you might be eager to jump straight into starting your own practice right after graduating from dental school, it often makes more sense to join an existing practice as an associate. This will let you work your way up while gaining a feel for the industry and accruing valuable experience. It will also let you get your finances in order so you can begin getting ready for your future dental practice loan application. This includes building your credit history and making inroads on dental school debt.
Build or Buy Your Practice
Starting a dental practice can cost over $500,000, according to Bank of America; these costs include building out an office, setting up a basic dentistry workspace with the proper equipment, and providing working capital to get your business up and running. This startup route can sometimes be tricky, and overspending is easy if you lack a clear and organized business plan.
You can also opt to buy an existing practice, which is one way around some of the startup risks. But this route also has its own set of risk factors, including customer satisfaction, annual revenue, etc. The ADA (American Dental Association) says that dentists are more likely to buy a practice than start their own, often by taking over for a retiring dentist.
Figure Out the Financials
You will likely need a small business loan to start a dental practice, and your options for this typically include traditional banks, online lenders, or SBA loans. Many brick and mortar banks offer loans, specifically for dentists—and some even offer discounts for dental associations! Online lenders are often easy to qualify for, and the speed of their application and approval process (which can sometimes even be a few hours) is a big draw for many. The U.S. Small Business Administration also guarantees business loans which are issued by participating lenders; these loans usually come with flexible terms and low interest rates.
Regardless of the way you apply for your loan, though, you will need your finances in order! If you don’t have enough cashflow to support all your debt obligations, have a subpar credit score or history of late payments, or the practice you’re buying has underperformed, your lender might see it as a red flag.
Address Your Student Debt
Naturally, your student debt may be your biggest monthly bill. If your loans are creating a cash flow problem, you might consider enrolling in income-driven repayment, which ties your federal loan payments to a percentage of your discretionary income, usually around 10%. You might also consider refinancing to a lower payment; refinancing dental school loans at a lower interest rate can reduce your monthly loan payments and increase your cash flow. It might also save you money overall. Ultimately, the right option will depend heavily on your individual financial situation, including things like credit card debt, car loans, mortgages, and more.
About Next Level Consultants
Michael Dinsio, Paula Quinn, and their incredible team at Next Level Consultants have comprehensive knowledge of the dental industry and are committed to helping you navigate the process of owning and operating your own practice. Over the years they’ve helped hundreds of dentists start, buy, and grow their own practices and are looking forward to helping you next. If you have any questions about financing your dental practice, don’t hesitate to contact Next Level Consultants today.