SBA Loans for Dental Practices
SBA loans can be an option for qualified dentists who need financing to purchase, start, expand, or improve a dental practice. Depending on the SBA program and transaction, financing may potentially be used for several different business purposes.
For dentists considering dental practice financing, understanding how SBA financing works can help determine whether it may be appropriate for their situation.
What Can an SBA Loan Be Used For?
Depending on the loan program and lender, SBA financing may potentially be used for eligible business expenses such as:
- Purchasing an existing dental practice
- Starting a new dental practice
- Working capital
- Equipment
- Leasehold improvements
- Commercial real estate
- Business expansion
The specific eligible uses depend on the SBA program, lender, and structure of the transaction.
SBA Loans for Dental Practice Acquisitions
One common use of SBA financing is purchasing an existing dental practice.
An acquisition loan can potentially help a qualified dentist purchase an established practice rather than using all of their personal capital for the transaction.
When evaluating an acquisition, lenders may review the practice’s historical financial performance as well as the buyer’s financial position and qualifications.
SBA Financing for New Dental Practices
Dentists opening a new practice may also consider SBA financing for eligible startup expenses.
A startup transaction can involve construction, equipment, technology, furniture, supplies, and working capital.
Because a new practice does not have an established operating history, the dentist’s financial strength and business plan can be particularly important.
Can SBA Financing Be Used for Equipment?
Dental equipment can represent a significant investment.
Depending on the loan structure, SBA financing may potentially help fund eligible equipment purchases as part of a larger business financing transaction.
Dentists should identify the equipment required and obtain accurate estimates when developing their financing plan.
Commercial Real Estate
Some dentists choose to purchase the property where their practice operates.
Depending on the SBA program and eligibility requirements, SBA financing may potentially be used for eligible owner-occupied commercial real estate.
Real estate financing can allow a dentist to combine the purchase of the property with other eligible business needs in an appropriate transaction structure.
Working Capital
Working capital can be important for both new and established dental practices.
Funds may potentially help support eligible operating expenses such as payroll, supplies, marketing, rent, and other normal business costs.
The amount of working capital needed can vary based on the practice’s size, revenue, expenses, and growth plans.
What Do Lenders Consider?
SBA financing still involves an underwriting process.
A lender may evaluate factors such as:
- Credit history
- Income
- Existing debt
- Liquidity
- Professional experience
- Business financial performance
- Cash flow
- Collateral when applicable
- Overall ability to repay the loan
Prepare Your Documentation
Dentists considering SBA financing should be prepared to provide financial and business documentation.
Depending on the transaction, this may include personal and business tax returns, financial statements, personal financial information, bank statements, purchase agreements, equipment quotes, and other supporting documents.
Understand the Total Financing Need
Dentists should consider all anticipated project costs before determining the amount of financing to request.
For an acquisition, this may include the practice purchase price, equipment, working capital, and other eligible expenses.
For a startup, the budget may include construction, equipment, technology, staffing, marketing, and working capital.
Start the Process Early
SBA financing can involve documentation and underwriting requirements, so dentists should consider beginning the process early.
Preparing financial documents, developing a detailed budget, and understanding the proposed transaction can help make the process more efficient.
Final Thought
SBA loans can provide a potential financing option for qualified dentists purchasing an existing practice, starting a new practice, acquiring equipment, purchasing eligible commercial real estate, or funding other eligible business expenses.
The best financing structure depends on the dentist, the transaction, the intended use of funds, and the applicable SBA and lender requirements.
