Loan Pre Approval – Dental Acquisition Consultants

Loan Pre-Approval

DENTAL PRACTICE FINANCING

DAC has direct connections with top dental lenders in the U.S., and we’re here to guide you through the pre-approval process. To save you time and effort, we only refer to banks with dedicated dental loan departments, ensuring you work with lenders best suited to your needs. Our goal is to secure the lowest possible interest rates and obtain 100% financing, including working capital and funds to purchase the seller’s accounts receivable. Additionally, we collaborate with non-traditional banks that provide financing for dentists with less-than-perfect credit.

Get pre approved, contact our trusted bankers

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Huntington Bank

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Bank of America

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U.S. Bank

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THE 4 MAIN COMPONENTS OF DENTAL FINANCING

Many first-time buyers are often confused or misled about dental practice financing. Some believe they must purchase a practice generating at least $800K, while others assume that choosing a low-revenue practice will improve their chances of loan approval by keeping monthly payments lower. Let’s set the record straight: The four components listed below are exactly what banks evaluate when reviewing a loan application. However, keep in mind that there is some flexibility, and nothing is set in stone.

Cash Flow: Cash flow refers to the income your new practice generates after covering operating expenses and loan payments. Lenders want to ensure that your practice generates enough income to cover your loan obligations as well as personal debts, including student loans. Generally, low-revenue practices (collections under $600K) are harder to finance because they often lack sufficient cash flow to support both business and personal expenses. However, some lower-revenue practices maintain low expense ratios, making them more viable. For example, a $600K practice with 70% overhead yields a net income of $180K, whereas one with 55% overhead generates $270K—significantly improving financing prospects. In our opinion, you should focus on practices with a minimum net income of $250K to maximize financial stability and loan approval chances.

Liquidity: Liquidity refers to the funds you have readily available without incurring significant tax penalties. Examples include checking and savings accounts, stock trading accounts, and cash on hand. Retirement accounts are generally not considered liquid. Banks typically require buyers to have a minimum of 5–10% in liquid reserves before approving a loan. For example, if you're purchasing a $700K practice, a bank requiring 5% liquidity will expect you to have $35,000, while a bank requiring 10% will expect $70,000. This is why we strongly recommend discussing financing options before applying with a specific bank. If you only have 5% in reserves, applying to a lender that requires 10% liquidity could waste valuable time.

Important Note: Most banks allow liquidity gifts from family members if you fall short on reserves.

Credit: Most buyers are familiar with credit scores and their impact on financing. Banks understand that younger buyers may not have an extensive credit history or a high score. However, their primary concern is ensuring your credit report does not show late payments. If you have one or two late payments, providing a reasonable explanation may still allow you to qualify for prime financing. That said, a past bankruptcy or foreclosure can make securing a bank loan more challenging—but not impossible. Some non-traditional lenders offer specialized programs for buyers with previous credit issues.

Capacity: Are you able to match the seller’s scope of treatment and maintain their patient schedule? Lenders want assurance that you are clinically qualified and that your skills and efficiency align reasonably with the seller’s. While you don’t need to replicate the seller’s exact skill set, financing can become challenging if 20% or more of the practice’s production comes from endodontics, implants, or orthodontics—and you lack experience in these areas. Additionally, lenders generally prefer buyers with at least two years of associate experience along with personal production reports. While they recognize that an associate’s production is typically lower than that of an owner, this should not be a concern. Financing is possible straight out of school, but such programs often require the seller to carry 50% of the loan. Ultimately, you should seek a practice that aligns with your current expertise or a treatment area you plan to develop in the future.

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