How Long Does Dental Practice Financing Take?
The time required to finance a dental practice can vary depending on the type of transaction, lender, financing program, documentation, underwriting, and complexity of the deal.
For dentists considering dental practice financing, understanding the general process can make it easier to plan an acquisition and avoid unnecessary delays.
The Financing Process Has Several Stages
Dental practice financing generally involves more than submitting a loan application.
The process can include:
- Initial financing review
- Application
- Document collection
- Practice financial analysis
- Underwriting
- Loan approval
- Closing
The time required for each stage can vary.
Getting Prequalified Can Help
Before spending significant time negotiating an acquisition, a dentist may benefit from understanding their potential financing capacity.
A preliminary review can help establish an approximate budget and identify potential issues that may need to be addressed.
Gather Documents Early
Documentation is a common part of the financing process.
Depending on the transaction, lenders may request personal financial information, tax returns, bank statements, practice financial statements, purchase agreements, equipment information, and other records.
Having these documents organized can help reduce delays.
The Practice’s Financials Matter
An established dental practice can require detailed financial analysis.
Lenders may review revenue, expenses, profitability, cash flow, accounts receivable, and other information about the business.
Incomplete or inconsistent financial information can result in additional questions during underwriting.
The Purchase Agreement Can Affect Timing
The structure of the purchase agreement can influence the financing process.
Changes to the purchase price, assets included in the transaction, seller terms, real estate, or other material elements can require additional review.
Real Estate Can Add Complexity
If the acquisition also involves purchasing commercial real estate, additional documentation and analysis may be necessary.
The property itself may need to be evaluated separately from the dental practice.
New Practice Financing Can Be Different
Financing a brand-new dental practice can involve a different underwriting process because there is no established operating history for the new business.
Lenders may place greater emphasis on the dentist’s financial profile, business plan, startup budget, projections, and professional background.
Don’t Wait Until Closing Is Near
Waiting until the expected closing date is approaching to begin financing can create unnecessary pressure.
Dentists should consider starting the financing process early enough to allow time for documentation, underwriting, revisions, and closing requirements.
What Can Cause Delays?
Several issues can extend the financing timeline.
Examples include:
- Missing documents
- Incomplete financial information
- Changes to the transaction
- Complicated ownership structures
- Real estate considerations
- Questions about practice cash flow
- Credit issues requiring additional review
Keep Communication Moving
Responding promptly to lender requests can help keep the process progressing.
Buyers, sellers, accountants, attorneys, and financing professionals may all need to provide information during an acquisition, so keeping everyone coordinated can be valuable.
Plan Around the Acquisition Timeline
The financing process should be considered alongside the broader acquisition process.
Due diligence, negotiations, legal review, licensing, transition planning, and financing may all need to occur before the transaction can close.
Final Thought
There is no single timeline for dental practice financing. The process can vary based on the transaction, financing program, lender, documentation, practice financials, and whether real estate or other assets are included.
Dentists can help keep an acquisition moving by preparing financial documents early, understanding their financing needs, communicating promptly, and beginning the financing process well before the desired closing date.
