5 Oral Surgery Practice Loan Mistakes That Cost Owners the Most
Oral and maxillofacial surgeons rely on financing for many of their biggest decisions, from buying into a group to opening a second office, adding cone beam imaging or equipping a surgical suite for sedation. Recognizing the most common oral surgery practice loan mistakes early can help you protect cash flow, keep your options open and avoid terms that become a burden as the practice grows.
This article covers five mistakes that often cost owners the most and how to approach each one. Loan programs, terms and eligibility vary by lender and borrower, and nothing here is legal, tax, accounting or billing advice.
Mistake 1: Choosing the Wrong Type of Loan for the Purpose
An oral surgery practice has distinct financing needs. Acquiring an established practice, building out surgical operatories, purchasing imaging and monitoring equipment and covering a slow stretch of collections are separate problems, and each may need its own solution.
When the loan does not fit the purpose, payments can fall out of step with how the investment produces revenue. Examples include:
- Financing a practice purchase over a short term that strains monthly cash flow
- Using an operating line of credit to fund a surgical suite build-out
- Paying cash for imaging or sedation equipment that could have been financed over its useful life
- Wrapping the practice and the office building into one loan without weighing separate financing
Conventional practice loans and SBA programs may be options for a purchase, depending on the buyer, the practice, the use of proceeds, program rules and lender review. Our page on buying an oral and maxillofacial surgery practice explains how these deals are commonly put together.
Mistake 2: Borrowing Too Little and Running Short on Working Capital
Oral surgery practices bill both dental and medical plans, and many procedures involve pre-authorizations, medical necessity documentation and patient financing. That mix can make collections uneven. Borrowing only enough to close or finish construction may leave too little to cover payroll, anesthesia supplies, implant components and rent while claims are paid.
Costs that are easy to overlook include:
- Payer contracts, hospital privileges, state anesthesia permits and credentialing that should not be assumed to transfer to a new owner
- Keeping surgical assistants and front office staff through a transition
- Building relationships with the general dentists who send referrals
- Software, marketing and instrument replacement
Finding capital after a shortfall is often harder and costlier than planning for it at the outset. Including operating capital for oral surgery practices in your financing plan can provide a cushion through the transition. For more on how billing to both dental and medical plans affects cash flow, see our article on medical versus dental billing and what lenders look for.
Mistake 3: Comparing Offers Only on Rate or Monthly Payment
The rate is easy to compare, but it does not tell the whole story. Loans with similar rates can carry very different costs and restrictions.
When comparing offers, review:
- Repayment term: how the term affects both monthly payments and total interest
- Fees: origination, packaging, appraisal, legal and closing costs
- Prepayment terms: whether early payoff triggers a penalty
- Collateral and guarantees: what assets are pledged and which surgeons are personally liable
- Covenants: financial ratios and reporting the practice must maintain
- Rate type: fixed or adjustable over the life of the loan
A slightly higher rate with more flexible terms may suit a practice that plans to add partners, open a satellite office or sell to a group later. Have your accountant and attorney review the full terms before you sign.
Mistake 4: Stacking Short-Term Debt
When cash runs short, some practices add one short-term obligation after another: a credit card for supplies, an online advance, a costly equipment lease and then another advance to keep up with the first. Each may seem reasonable alone. Combined, frequent payments can take a large share of collections and leave little flexibility.
Stacked short-term obligations can also weaken your position for future financing, because lenders look closely at existing debts. If your practice is carrying several short-term payments, it may make sense to ask whether some could be restructured into longer-term debt. Learn about refinancing and consolidating oral surgery practice debt. Not every obligation can be refinanced, and options depend on the terms of the existing debt, the practice’s cash flow and lender review.
Mistake 5: Applying Before You Are Prepared
Lenders that finance oral surgery practices want to understand the surgeon, the referral base and how the practice gets paid. An incomplete application can lead to delays, less favorable terms or a decline that could have been avoided.
Before applying, it can help to collect:
- Several years of business and personal tax returns
- Current financial statements and production and collection reports
- A breakdown of revenue by dental plans, medical plans and patient pay
- A list of existing debts, leases and payment schedules
- A clear explanation of how the funds will be used
- For an acquisition, the seller’s financials, the letter of intent and information on referral sources
Review your personal credit, be ready to discuss student loans and prepare to explain any unusual items in the numbers. Our oral surgery practice due diligence checklist can help you organize what a lender and your advisors may ask to see.
How to Avoid Oral Surgery Practice Loan Mistakes
Many oral surgery practice loan mistakes happen when owners rush the process or focus on one figure. These habits can help:
- Fit the loan type and term to the purpose
- Budget for working capital alongside the purchase or project
- Weigh the complete terms, not only the rate
- Avoid using short-term obligations for long-term needs
- Prepare your documents and referral data before you apply
Final Thoughts
Thoughtful financing can help an oral surgeon buy, expand and protect a practice, while a poor decision can limit cash flow for years. Understanding your options, planning for the full cost and presenting a well-prepared application can improve the outcome.
US Medical Funding helps oral and maxillofacial surgeons finance acquisitions, expansions, equipment, working capital and refinancing. Learn more about our oral and maxillofacial surgery financing options.
