Whether you’re a fresh grad looking to start up your own dental office, an experienced dentist ready to grow or expand your existing practice, or an established practitioner looking to upgrade your equipment or renovate your space, many dental practices seek additional funding to support their operations or fuel their growth.
Loans for dentists are generally considered to be a safe investment by lenders, in part because dentists earn an income that’s well above the average small business owner—in 2020, the median salary for dentists was $164,010, compared to $56,590 for food service managers, and $56,900 for electricians. Some lenders even offer special funding options that factor in the unique borrowing needs of dentists, such as student debt.
Dental practice loans can benefit practices in all sizes and specialties, including:
- Family dentistry
- Oral surgeons
To help you find the right funding for your needs, we’ve outlined 6 of the most popular business loans for dentists, including SBA loans, bank loans, alternative funding, and more.
6 Dental Practice Loan Options to Consider
1. Small Business Administration (SBA) Loans for dentists
Small Business Administration loans are actually provided by partnering lending institutions, but are guaranteed up to 90% by the SBA. This reduces the risk to the lender and results in lower rates and longer terms for borrowers. Loans from $5,000 up to $5M are available with terms ranging from 5-25 years.
For just about every industry, funding offered through the SBA’s various loan guarantee programs is often considered to be the best option. While there are compelling advantages to SBA loans, such as longer terms and lower rates, there are drawbacks to consider as well.
SBA loans have very strict approval requirements with the most rigorous documentation requirements of any lender, including several years’ worth of detailed financial documentation and a business plan that outlines why you are seeking funding and how you plan to repay it. It can take weeks or months to process your application, and approval is never guaranteed. Collateral and/or a personal guarantee are also required.
The SBA and their partnering lenders typically prefer to grant large loans to wealthy businesses, and often reject applications for smaller loan amounts or applications made by businesses with healthy financial profiles but which still don’t quite meet their strict approval requirements. These requirements exclude many businesses, including successful dental practices with strong cash flow.
2. Bank loans for dentists
Commercial banks offer a number of funding options for dentists. Some commercial banks, including Bank of America, Wells Fargo, and U.S. Bank, have even partnered with the American Dental Association to offer lending options designed specifically for dentists that feature unique advantages such as reduced fees and other special offers for ADA members.
Loans from $30,000 up to $5M are available with terms up to 25 years. The exact terms of your dental practice loan will depend on the purpose of the loan and the loan amount, as well as your financial history and creditworthiness. Start-up loans are also available, with interest-only and graduated payment schedules.
The application process for a bank loan is as selective as SBA loans, but with potentially shorter timelines. However, it could still take weeks to process your application, and approval is never guaranteed. Collateral and/or a personal guarantee are often required, and it may also be difficult to get funding from a traditional bank if you don’t already have a relationship with that institution.
3. Alternative dental practice loans
Also called online lenders, alternative lenders like Greenbox Capital® offer funding up to $500,000, typically for shorter term lengths ranging from three months to five years. These lenders provide a number of funding options that can benefit dental practices, including:
- Merchant cash advances
- Invoice factoring
- Business lines of credit
- Alternative small business loans
- Collateral real estate loans
The application process is more streamlined and less restrictive than the SBA and traditional banks, and in some cases it can even be handled entirely online. Funding can be deposited in as little as one business day, making alternative lenders an ideal option for dental practices looking for fast funding.
Approval requirements are also less restrictive than the SBA and traditional banks, making alternative funding available to more businesses, including:
- Newer practices (in operation for at least 6 months)
- Practices with a strong financial history but which don’t quite meet the strict requirements of the SBA or a bank
- Practices with low credit
- Practices looking for shorter term funding or smaller loan amounts.
Unlike SBA and bank loans, alternative lenders typically do not require collateral or a personal guarantee. However, because approval requirements are more lenient and terms are shorter, rates may be higher.
4. Business lines of credit
Business lines of credit function similarly to business credit cards, but with higher limits and longer terms. Available from both traditional and alternative lenders, lines of credit offer the most flexibility by providing your practice with an ongoing source of working capital that can be drawn from and repaid as needed. This makes lines of credit ideal for responding to unexpected expenses, purchasing supplies and equipment, or repairing equipment. You only ever pay interest on the amount you borrow.
5. Equipment loans
Dental practices have significant equipment needs, including dental chairs, lighting, x-ray and imaging equipment, basic instruments, office computers, and PPE for staff. This equipment can be very costly to purchase, and regular maintenance and unexpected repairs can also put a strain on your practice’s cash flow.
Equipment financing is designed specifically to fund the purchase of new equipment. This type of funding may require a down payment to purchase new equipment, but because the equipment acts as collateral to secure the loan, equipment financing may be easier for newer businesses still establishing a credit history or businesses with lower credit scores to acquire.
6. Dental practice purchase loans
Some lenders offer funding options that are designed specifically to help you purchase a dental practice, whether you’re just starting out or are ready to expand to a new location. However, because they are typically for higher loan amounts and longer terms, dental practice purchase loans often require significant paperwork and many applicants are rejected.
What Dental Practice Loan is Best for You?
The best dental practice loan ultimately depends on why you’re seeking funding and how you intend to use it.
For larger loan amounts and longer terms, SBA or bank loans are the best option for businesses with healthy financial histories and extremely strong personal and business credit. Alternative lenders also offer longer-term funding options if your dental practice doesn’t meet the strict requirements of these lenders.
For short-term funding, alternative lenders can provide an infusion of working capital that can help you meet immediate cash flow needs such as payroll or repairing equipment, as well as growth strategies like boosting your marketing or hiring staff.
For fast funding, alternative lenders are the best option. These lenders have a streamlined application process with fewer documentation requirements and can provide funding in as little as one business day.
For flexible funding, business lines of credit are an ideal source of working capital. You can draw from and repay the line of credit as needed to cover everyday or unexpected expenses, and you only pay interest on the amount you borrow.
How to Use Dental Practice Loans
Some lenders, including the SBA and banks, as well as certain funding types, will restrict how you can use your funds. Unless specified, business loans for dentists are commonly used for:
- Working capital: Covering day-to-day expenses like payroll, supplies, rent, utilities, and insurance.
- Expanding or renovating: Opening a new location or sprucing up your current office with new fixtures, decor, or equipment.
- Acquisition: Dental practice purchase loans can be used to acquire an existing practice or buy into one as a new partner.
- Purchasing equipment: Dental technology is always evolving. Investing the latest technology can keep your practice on the cutting edge.
- Starting a practice: From equipment to office space to hiring employees, starting a practice can be very costly. Many dentists, whether they’re new to the career or are branching out on their own, need funding to help cover these expenses.
Get the Dental Practice Loan You Need
Multiple types of business loans for dentists are available from a variety of lenders, including the SBA, banks and other traditional lenders, and alternative online lenders like Greenbox Capital. The best dental practice loan ultimately depends on your goals and your practice’s creditworthiness.
The SBA and other traditional lenders may offer the best rates and longest terms, but these lenders have very strict approval requirements and most applications are rejected. Alternative lenders have flexible approval requirements and a variety of innovative funding options that make more funding available to more dental practices, including newer practices, practices seeking lower loan amounts, practices with lower credit scores, and practices looking for fast funding.
- “How to finance a dental practice.” Jared Hecht. DentistryIQ. September 20, 2019.
- “Occupational Outlook Handbook: Dentists.” U.S. Bureau of Labor Statistics. Last modified September 8, 2021.
- “Occupational Outlook Handbook: Food Service Managers.” U.S. Bureau of Labor Statistics. Last modified September 8, 2021.
- “Occupational Outlook Handbook: Electricians.” U.S. Bureau of Labor Statistics. Last modified September 8, 2021.