Our goal at Lending Valley is to provide all small business owners access to the best loans possible for their business. You can rest assured we will get you the best rates in the market!
The world of dental practice loans is pretty confusing since there is a widely known misconception that acquiring loans for a dental surgery is easy. Well…that isn’t strictly true.
There are a whole wealth of factors that come into increasing or decreasing your chances of becoming approved for a dental business loan. Thankfully, we are here to give you all the insider secrets so you go into it fully informed and ready to take on the application process.
A dental practice loan is exactly that — a loan for dentists to start up their dental surgery. Or, if they already have a practice, they may need an influx of cash if they need to do large renovations or quickly buy new equipment.
Banks tend to be more open to applications that come from the dental industry as it is what is known as a green light sector business. Since people who are buying dental practices are mostly cautious and thoughtful, banks see them as good investments for themselves.
However, banks will no longer lend out masses of money to you just because you have a degree in dentistry (unfortunately). You might be wondering where the banks get their confidence in dental practices from then? Well, it is the determination, motivation, and ambition from the newly qualified dentists that do it.
As we are sure you are aware, there are plenty of dental practice loans on the market so it is quite hard to sift through them all to find the ones that work for dental practices. However, luckily you have stumbled upon us as we have compiled all the common types of loans used for dental practices here.
Bear in mind that your credit history (and your businesses’ credit history, if applicable) is an incredibly important factor when deciding which dental practice loan to go with. Also, you will need to take interest rates and repayment terms into consideration too before you go much further.
These types of loans are government-backed and their interest rates are usually far less than 10 per cent. However, the repayment term can be up to 20 years which is rather long.
Since they are secured loans, dental practices that are looking for a low monthly payment for a heftier sum of loan money.
People use banks all the time for saving and withdrawing their funds so, once you have been a customer at a bank for a few years, you will make first place when it comes to them considering you for a loan.
Every bank out there markets different schemes to seduce start-up business owners to take out a loan with them.
Banks make the big bucks from the interest they put on the loans you take out with them so they have a personal interest to what to have you onboard.
Investors and venture capitalists want a slice of your company or the decision making — not to mention they also take dividends. Banks don’t do this at all — they just want their interest!
Banks can offer you far more attractive interest rates than other lenders and credit cards.
Dental practices that take out a small business loan are exempt from paying some tax. Why? It is because their profits that are used to pay back the loan are excused from taxation.
Since the bank has to verify a lot of aspects about you and your business before they go ahead, the process of application is extremely long.
As a dental entrepreneur, you will probably find that having to get together all the details that banks require is pretty unnecessary and time-consuming.
Banks want a low-risk business, which is why they prefer those who are already on the profit wagon as they can accurately predict future earnings. Plus, they have a clear credit history to look at.
Banks have a whole range of requirements that you must meet before they will approve you and it isn’t always possible to actually meet every one of them.
If you apply for a loan for a certain amount, the bank will probably not offer you the full sum. Instead, they might give you 70-80 percent. This can prove to be a pretty negative thing for new dental practices as you will have to find the leftover 20-30 percent from somewhere.
You could lose your assets (car, house, land, etc.) if your business doesn’t go as planned.
A Merchant Cash Advance, also known as an MCA, is a type of dental practice loan where a lender buys a bit of your practice’s future revenue and you are provided with the cash advance all in one go.
With this option, you will never be burdened with payments you have no chance of being able to handle. Sometimes, the daily or weekly (whichever one is best for you) payments are taken straight from the account you decide to use to process any sales.
Not to mention that you won’t need to pay it back should you go out of business and a lot of businesses qualify since you don’t need any down payment or collateral.
If you need money rapidly, you will not have time to handle all the required paperwork for other loan types — you should definitely give a Merchant Cash Advance a look as you can have your cash in a few days.
Your money is not tied down. This means that if you don’t repay one day or your sales plummet, neither you or your business will be viable.
Since the money is being released in confidence that you will be making sales in the future, they don’t look at your credit rating.
If you get lucky and your sales are reaching the dizzy heights of success, you’ll be looking at a higher interest rate since you’ll be paying the advance off a lot faster.
You might find that your practice gets stuck in a horrible cycle where you can’t get out of having a business cash advance due to the expense and daily payment.
Unfortunately, Merchant Cash Advances contain the highest APR rate (we mean it — the APR can go as pricey as 350 percent!).
Legally, Merchant Cash Advances aren’t seen as business loans since they are paying for the promise of sales.
However, The Small Business Finance Association has developed guidelines that MCA providers have to follow. The trick is to always check beforehand that your chosen lender is working within these regulations.
Merchant Cash Advances will not aid you in your quest to build business credit. As you now know, they are not seen to be a loan by the law they are never reported to the business credit agency.
Invoice factoring is also known as ‘debt factoring’ or simply ‘factoring. It allows businesses to sell unpaid invoices to a factoring company.
This company buys the invoice for a part of the sum total and then it falls to them to collect the payment for the invoice.
In recent times, this financial product has become far more popular since businesses that may not have the greatest credit scores are finding it increasingly difficult to get approvals from traditional loan systems.
Your dental practice may want to use this product type to quicken the pace of receiving incoming funds and therefore, accessing them too. Why would this ever be an issue? Well, actually getting payment from invoices can take a while so, invoice factoring can ‘cut out the middle man’ so to speak and make your money available faster.
There are many advantages to using invoice factoring, including:
Of course, there are also disadvantages to using invoice factoring, such as:
Since acquiring the best equipment can boost productivity, improve customer satisfaction and minimize labor, it is vital that you have top-quality stuff.
However, obtaining all of this may be way too much for your dental practice to afford initially which is where equipment financing can help you get off the ground.
This is a loan that can only be used to buy assets and equipment relevant to your business. The lender will hand you enough money to purchase any necessary equipment like:
After you have repaid the whole loan, the equipment is fully owned by you. Of course, this is the biggest benefit, as you can imagine.
This is useful for products that do not have an expiry date (like the chairs and mechanical equipment you will need for your dental practice).
Since the equipment you will be buying with the loan is just for your business, you will be able to claim everything you purchase against tax. Yes, you heard it right — you will be getting some serious deductions!
Buying an expensive bit of kit can seriously harm your business’s cash flow. However, if you use equipment financing, you will then be able to split to cost over several months so you can fix any cash flow problems.
You will never need to hand over any collateral upfront and be scared of losing it if you go with an equipment financing product because the actual equipment is the collateral.
Depending on the lender you choose to go with, you will be offered different payment schemes.
Our advice is to have a good rapport and working relationship with your lender so your repayment schedule can be negotiated by you far easier.
You could be provided with a monthly, seasonally, quarterly or annually schedule. Make sure it fits your needs!
You will be able to gather up your money fairly quickly with equipment financing so you can be sure you waste no time in buying your equipment.
Some lenders even release the funds on the same day that you apply!
Yes, you are right, this did appear on the list of advantages as well. Why? Well, it is simply because fully owning the equipment is a good thing, as well as a bad thing.
Computers, software and anything that can break pretty quickly is not a great product to use your equipment financing loan for. Think long-term when purchasing items with this type of loan.
You can only use the money for equipment — hence the name of the loan. This can be seen as a negative aspect because you will not be able to use it should financial problems arise with rent or various other elements.
Since you will have to pay interest on your loan, you will be paying more than if you bought your equipment outright using your own money. Obviously, this may not be feasible for your new dental practice (which is why this type of loan exists in the first place).
As you own the equipment, you are responsible for it. So, if anything breaks or goes wrong with your purchases, you have to find the cash for all maintenance costs.
Dentists, like yourself, are considered to be professionals (and rightly so). You should be able to acquire this type of loan pretty easily.
Usually, the come with interest rates that are below 10 per cent and can provide you with a repayment schedule that spans over a few months.
A professional loan from a bank — otherwise known as a traditional business loan — is most commonly used to buy inventory, equipment and real estate, or for buying another business and refinancing.
There are a few advantages to obtaining a professional loan, including:
Of course, there are also a few disadvantages that come with a professional loan, such as:
It all depends on what specific items you are needing a dental practice loan for.
If you just need capital for purchasing equipment, then dental equipment financing might be the way to go, unless you prefer the factors that make up merchant cash advances financial product type.
However, if you need your loan for a variety of factors, then you will want to go for a professional or small business loan.
On the other hand, if your dental practice has already started, then you may decide to choose the invoice factoring option.
Besides the above, make sure that you consider these factors alongside everything else when you are making your decision:
Once you have decided on the type of loan or financial product you want to apply for as a dental practice, you need to know how to do so. Just keep reading, we have you covered.
During the application process for a small business dental loan, stick to these key steps:
If you are just starting up your dental practice, you may not know how much you need from dental practice financing firms like us and exactly the reason why you need it. But, you do need to be able to provide solid reasons for both of these factors so you will have to put some effort into this step.
It may be that you need to put together your business plan and financial statements first before you are able to complete this step.
Those of you who are just starting out will probably want some advice from people who really know what they are talking about.
SCORE is a non-profit team of business executives who have retired, so if you have one near you, pay them a visit. However, you can opt for online advice instead in chat rooms and forums.
SBDC is a section of the Small Business Administration and is there solely for helping small businesses. They will definitely help you with your application!
For new dental practices, banks will look at your personal credit history if there isn’t enough data behind your business to go on. With this in mind, it may be obvious that you must have your credit history in good shape before you start applying.
Ask for your personal reports from major credit reporting agencies such as:
Once you have them, take a good look at them and see if there are any mistakes that need to be rectified. You will need to contact the agency if you find any through the proper, written process.
Then, have a gander at your credit score. If it is around the 700 mark, you are well and truly good to go.
Don’t think that you only have a chance with the national commercial banks — it is more likely to be that you are more likely to be approved by regional commercial banks.
Credit unions might be an avenue that you prefer. If you are already a member, then you can have a chat with the loan officer about your small business loan. It is also wise to collect a loan application form while you are there too.
Trust us — this is the most crucial step of all.
Until you have developed a great business plan, you probably won’t know the total amount of money you need or how quickly you will be able to pay it back.
Although the business plan isn’t technically part of the loan application, it is absolutely necessary to present it in addition to the form.
There are so many sections to a business plan that you need to fulfil such as:
You need to make your application engaging. Put together a presentation that goes along with your business plan and it all over professionally to the loan officer. Do not forget to include a narrative, as well as any graphs, charts, spreadsheets and financial statements that are needed.
Remember to include an Executive Summary — they will usually read this before anything else and then decide whether they want to proceed.
After this, you need to make an appointment with the officer so you can present everything.
Since no collateral or deposit is needed, most businesses will qualify for merchant cash advance financing. However, when applying, you still need to follow some steps.
The companies who offer merchant cash advances rarely look at the profitability of your business. You just need to prove that you can have enough people paying by card in order to cover the monthly payments.
Although each merchant cash advance lender will have various requirements, however, most of them will have qualities surrounding these aspects:
To better streamline the process, you need a few documents to hand before you start applying for this type of financing. This includes:
Your application for invoice factoring is more likely to be approved than traditional financing but you do still need to meet requirements and perform certain steps in order to be in with a chance.
You must be able to meet certain requirements before they will even consider your funding. These are necessary aspects you have to fulfil:
All you have to do now is fill in the application form!
An Executive Summary includes certain types of information like:
This should be no longer than an A4 page since this is read by the business development officer who writes about your business, then gives it to underwriting. Underwriting takes a look at everything and then decides whether or not to release funding.
Applying for equipment financing is more straightforward than a traditional bank loan. Follow these 4 steps to be in with the best chance at getting approved.
Bad credit will do nothing but harm your chances of becoming approved. You have to make sure you do your research beforehand so you know your risk level.
Your business plan is the document that lenders will use to determine your future success.
Make sure you cover these aspects in your plan:
The lenders you apply to will look to your CV to figure out your personal character traits to determine how you will run your business.
Lenders need to be able to see how much money comes in and how much goes out before they will offer you any equipment financing.
Your best bet is to hire an accountant to take care of your financial statements for you. Remember to sort out your personal statements too, not just your business ones — they both need to be sharp and accurate.
There are so many benefits that come from owning your own dental practice such as:
However, you might not have all the money upfront to dive into your exciting dream of opening your own surgery, so you will need a dental practice loan in order to gather the funds. So, yes! If your dream is to own a dental practice then go forth and grab one of our dental practice loans to kickstart your dreams!
