Loan Options for Dental Office Expansion

Loan Options for Dental Office Expansion

Loan Options for Dental Office Expansion

If you’re looking to expand your dental practice by increasing your office space, adding a new location, renovating your existing dental office, or buying another dentist’s practice, you may want to consider a dental office loan.

A dental office expansion can be a good way to increase your business and your brand, but it can cost money you may not have, especially if your dental practice is new.

Read on to find out more about dental office financing options for your dental practice.

What Are Loan Options for Dental Office Expansion?

There are many types of dental office loans, and the type you choose will depend on your plans and what you need the money for, including the loan amount and your repayment plans. You may need working capital loans or equipment financing to expand or pay for renovations to your existing practice and buy new dental equipment, or you may consider a business line of credit to help with cash flow. 

The type of financing you get will also depend on your qualifications, such as your:

  • Credit scores (both business and personal)
  • Time in business
  • Annual revenue

Lenders want to make sure that you can repay the loan, so they’ll ask for these items and more as proof of your creditworthiness during the loan application process. This information will also determine what kind of interest rates and terms you can get — the more creditworthy your business is, the lower the interest rate and the longer the terms that may be available to you. It’s a good idea to learn how to establish business credit so you can be better qualified for business financing. 

Here are some types of small business loans and other financing you may consider for your dental business:

Term loans

Term loans are traditional bank loans, and dentists can use these to expand their business. Some lenders specialize in dental practice loans or have specific loans for dental practice financing, such as Bank of America and Live Oak Bank. Qualifying for term loans from traditional banks can require a higher credit score, but these types of loans usually come with the longest repayment terms and lowest interest rates, and may also offer more in terms of loan amounts.

Working capital loans

If you’re looking to bring on new employees, rent out a new space, or increase your operational overhead, a working capital loan can help you pay for these everyday expenses. They’re often used by businesses that have slow seasons (like retail businesses, tourism businesses, or restaurants with seasonal clients), but they’re available to small businesses of all types. 

Alternative loans

Online lenders or alternative lenders are another route you may take for your dental practice loan, especially if you don’t have much of a credit history or a lot of time in business. Borrowers who apply for alternative loans may have an easier time getting them, and the application process may also be much shorter. However, these loans can come with high interest rates and short-term repayments, so it’s important to choose the right loan program for your needs. 

Equipment financing

Equipment financing can be a good option if you’re looking to remodel or add new equipment to your dental practice. You may consider leasing or owning outright, but you will probably need a down payment with most equipment loans. As with term loans, you’ll need to ensure you can make a monthly payment, and you’ll need to have good credit to get the best terms. In equipment financing, the equipment itself serves as collateral.

Business line of credit

A business line of credit can help you open up cash flow. Unlike a loan, you use the line of credit up to your limit to pay for items as you go, rather than receiving a lump sum. You also just pay for what you use and pay interest on that, depending on your annual percentage rate (APR). With most business lines of credit, once you repay the amount you’ve spent, you can use it again, too. 

Business credit card

Business credit cards are another great way to open up cash flow for your business. You can use the card to pay for equipment or office expenses, allowing you to open up cash for expansion purposes. However, leaving a balance on your credit card can add up quickly depending on the APR or interest rate, and it can be more expensive to use this kind of debt than other loans. But it’s a good idea to have a business credit card that can help your business build its credit score, as long as you can afford it. 

SBA loans

The U.S. Small Business Administration (SBA) offers government-guaranteed loans for small businesses throughout the U.S., including to the dental industry. The SBA has many loan programs for small businesses, including commercial real estate loans. While SBA loans have some of the best terms available, they can also be very difficult to get for a small business owner who doesn’t meet all the requirements. 

How Can I Make My Dental Office More Money? 

Expanding your dental practice with new equipment, more staff, and increased marketing can be great ways to bring more money into your dental practice. You can also consider expanding into new locations through buying or leasing commercial real estate or purchasing another dental practice. 

There are many practical things you can do within your office to increase revenue, including:

  • Expand training so that your employees are more efficient
  • Create a better patient experience through improved customer service initiatives
  • Automate as much as you can, including data entry, patient reminders, billing, accounting, and scheduling
  • Specialize in a rare procedure or cutting-edge technique
  • Make sure your business plan and marketing plan are organized and up-to-date

While bringing in more money can help you with your plans to expand, it’s often a good idea to consider financing for big projects to help you successfully expand your business. 

How Many Square Feet Should a Dental Office Be?

The size of your dental practice will depend on how many treatment rooms or operatories you want to have. Most operatories will need to be 300 to 400 square feet. You’ll also need space for restrooms, a waiting area, and any other specialized equipment rooms such as those for X-rays or surgeries.

The American Dental Association (ADA) recommends that you follow this equation to determine how many square feet your full dental office will require:

(Number of Operatories x Square Footage of Operatories)/.275

So if you were to have three treatment rooms at 300 sq ft each, the equation would be:

(3 x 300)/.275 = 3272.72 sq ft.

This can help you determine what sort of real estate you’d like to lease or buy for your new practice or expansion. 

How Can a Young Dental Practice Market Without Incoming Cash Flow?

While dental school may have taught you the ins and outs of good dentistry, it’s unlikely you learned how to be a good small business owner. Marketing your business is the number one way to bring in customers, but good marketing can cost money. 

As a dental professional, there are several low-cost ways that you can market a young dental practice, such as:

  • Creating a referral program for customers
  • Encouraging customers to leave reviews for your practice on Yelp or Google
  • Having a good social media presence, including offering specials or discounts (be sure you follow HIPAA guidelines when it comes to posting images of patients, though!)

However, getting a new dental practice running can require a little bit more of an investment in marketing. Dental office loans and other types of financing can help you make space for more marketing in your budget, helping you to bring in more cash in no time. 

What Are the Best Lenders for Dental Practices?

There are several different funding options for dental practices. Here are a few options:

Intermediate-Term Loan by Kapitus

With 1%-1.5% per month, this can be a good option for dental practices looking for $20,000 - $5,000,000 for an expansion. 

Get access to relatively quickly: .

SBA Loan by SmartBiz

With the SBA Loan by SmartBiz, you can get $30,000 - $500,000 in 1 month if you qualify.

Bank of America Dental Practice Loans*

As a national financial institution with branches throughout the U.S., getting a dental practice loan from Bank of America may be one of your best options. They have special offers on secured term loans and secured credit lines, and also offer benefits for veterans. They offer financing for starting a new practice, buying an existing practice, or expanding your dental practice, and qualifications depend on the type of financing you need. 

Live Oak Bank Dental Practice Loans*

Having financed over $1.5 billion in dental practice loans, Live Oak Bank offers loans for building a new practice or expanding an existing one. They can help you find the right financing for your dental office expansion, remodel, or how to build it from the ground up.

*All information about these loans has been collected independently through Nav. These loan offers are not currently available through Nav. 

Learn more on dental materials financing loans to get a bigger picture of what options are available to you. 

If you’re looking for financing options to expand your dental practice, Nav can help. We take information about your business and its individual needs and match you to the offers you’re most likely to qualify for. Sign up with Nav today to start seeing your options.

This article was originally written on October 14, 2022.

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