What Costs are Required to Open a Dental Practice?
Starting a New Dental Practice
If you want to start your practice from scratch, you might want to go for a graduated loan. Usually, these types of loans begin with interest-only or low payments that restrict your expenditures during the opening phase and initial construction. In this case, lenders might release the fund disbursements over time, by paying your contractors progressively. This can reduce the amount of interest you need to pay.
Buying an Existing Dental Practice
Buying an existing dental practice instead of building one from scratch has its pros and cons in terms of cost.You will likely need to look for a loan such as dental practice financing that will cover equipment upgrades or renovations plus the purchase price.
Working Capital Financing
If you have a practice that is already up and running, you might need help sustaining cash flow especially during a slow business period. An online lender that gives quick funds may be your best option because it will provide you with quick access to cash.
Dental Equipment Financing
Dental equipment financing might be easier to get than dental practice loans because you can use other equipment as collateral for the loan. Unlike small business loans, dental equipment loans might not be amortized. This means that the loan amount comes with the financing charge. This means that paying off the loan before due time won’t save you money as the interest doesn’t accrue over time.
Dental Software Financing
Software purchase and licensing needs for your dental business can grow over time - anywhere between hundreds of dollars to thousands of dollars. As your practice grows, your technology needs might change. You may also need funds to teach staff how to use the new software.
How to Meet the Requirements for a Dental Practice Loan
Lenders have their own set of underwriting requirements. These requirements can differ according to the sort of financing you are after and what you plan to do with the money. If you are after significant funding to buy, start or expand a business you could be required to:
- Create a business entity, including a limited liability corporation or company
- Make a business plan that you can show the lender if you are starting or purchasing a new practice
- Have a solid record of paying personal debts in a timely way. A personal credit score of around 720 or more can be essential for accessing good rates, however, you can access some financing with a lower credit score.
Many dentists have several hundred thousand dollars in student loans as dental school is costly. Such loans may influence your capacity to qualify for financing with a business lender. Yet, lenders that have experience working with dentists know that having a dental school loan is the norm. As such they often overlook the loan balance and pay attention to your payment history instead.
Ensuring that you have a history of paying your bills off on time and making sure that you have enough money to deal with short-term emergencies, can help you qualify for a dental practice loan. If you have a strong financial record, you could qualify for a large equipment or dental practice loan without laying down any money or an origination payment.
Can You Qualify for Dental Practice or Equipment Financing with Bad Credit?
Personal credit can influence your eligibility for a dental practice loan. Yet, bad credit will not put you out of the game entirely - it depends on the particular lender you choose and on the specific reasons behind your bad credit.
You may wish to explore ways to better your credit prior to applying for a loan. Then, after bettering your credit and business’s finances, you could qualify for a loan with a lower rate. You may then be able to use the money to refinance your debt.
If you require capital fast, merchant cash advance or business credit cards from an alternative lender could be a good avenue to explore. However, you will pay more in interest (you can however pay your credit card balance before you need to pay interest).
How Many Years Will You Have to Finance Dental Equipment?
The repayment conditions of your loan can differ according to the sort of financing you are using to buy equipment. If you choose to apply for a dental equipment loan, you may have several months - 10 years to pay back the loan. Yet, bigger practice loans, specifically those that will cover equipment and commercial real estate, may come with extended loan terms of as many as 15 -25 years.
The longer your terms of repayment, the lower your payments per month will be. However, a longer term also adds up to more interest, which could increase your cost of financing. Certain lenders will let you repay a loan early, without having to pay a prepayment fee. However, longer-term loans may come with a higher interest rate.