What Financial Documents Are Needed to Buy a Dental Practice?
Buying a dental practice involves more than finding the right practice and agreeing on a purchase price. Dentists seeking acquisition financing will generally need to provide financial and business information so lenders can evaluate the proposed transaction.
For dentists considering dental practice financing, preparing the necessary documentation early can help make the financing process more organized and efficient.
Personal Financial Information
A lender may request information about the dentist’s personal financial position.
This can include:
- Personal financial statement
- Personal tax returns
- Bank and investment account statements
- Information about personal assets
- Information about existing liabilities
This information can help the lender understand the borrower’s overall financial position.
Business Tax Returns
If the dentist already owns a business or practice, business tax returns may be requested.
These documents can provide information about historical revenue, expenses, taxable income, and the financial performance of an existing business.
Financial Statements for the Practice Being Purchased
The financial records of the dental practice being acquired can be particularly important.
Depending on the transaction, a lender may review documents such as:
- Profit and loss statements
- Balance sheets
- Income statements
- Accounts receivable information
- Revenue reports
- Expense information
Historical financial information can help lenders evaluate the practice’s operating performance and cash flow.
Purchase Agreement
The purchase agreement can provide important details about the proposed acquisition.
It may identify the purchase price, assets being acquired, terms of the transaction, seller information, and other important provisions.
Lenders may use the agreement to understand exactly what is being financed.
Practice Valuation or Appraisal
Depending on the transaction and lender requirements, a valuation or appraisal may be requested.
The purpose is to help establish whether the proposed purchase price is reasonable relative to the value of the practice and its assets.
Equipment Information
Dentists should also understand what equipment is included in the acquisition.
Documentation may include equipment lists, invoices, valuations, or other information describing major dental equipment and technology.
This can help the buyer and lender understand the assets included in the transaction.
Lease Information
If the dental practice operates from leased space, the existing lease can be an important part of the acquisition.
A lender or buyer may want to review the lease terms, remaining term, rent, renewal options, and other provisions affecting the practice’s occupancy.
Real Estate Documents
If the transaction includes purchasing the building, additional real estate documentation may be required.
This can include property information, purchase agreements, existing leases, environmental documentation, or other materials related to the commercial property.
Professional and Licensing Information
The dentist may also need to provide professional information relevant to the acquisition.
Depending on the lender and transaction, this could include a professional résumé or curriculum vitae, license information, and other documentation establishing the dentist’s professional background.
Debt Information
Existing debt should be disclosed accurately during the financing process.
This can include student loans, mortgages, business loans, equipment financing, credit lines, and other outstanding obligations.
Providing accurate information early can help prevent delays later in the process.
Keep the Documents Organized
A large acquisition can involve significant documentation. Keeping files organized and providing complete information can help reduce unnecessary back-and-forth during underwriting.
Dentists may want to create a secure folder containing personal financial records, business documents, practice financials, purchase documents, and other relevant information before applying.
Why Preparation Matters
Missing or outdated documentation can slow the financing process.
Preparing documents before submitting an application can make it easier for lenders to review the borrower and the proposed acquisition and identify any questions that need to be addressed.
Final Thought
The documents required to buy a dental practice can vary depending on the lender, financing program, and structure of the acquisition. Personal financial records, practice financial statements, tax returns, purchase documents, equipment information, lease documents, and other business records may all be relevant.
Dentists who organize their documentation early can be better prepared to move through the financing process and evaluate an acquisition with a clearer understanding of the financial requirements.
