Tips for Finding a Lender & Bank for Dental Practice Loans

If you decide to start your own dental practice, it’s likely that you’ll need to utilize professional service providers, such as a lender and bank. When you choose a lender and banking partner to help you navigate a new practice acquisition, there is more to consider than just the rate. This is the start of a business relationship that can dictate your ability to grow a successful business venture.

Before you begin your search for a lender that meets your needs, read below to get the “big picture” of lending for dental practice loans. 

Lending for Dental Practice Loans: What To Know

Understand Your Business Needs

It’s crucial to prioritize your professional and practice needs. Consider these questions when choosing a banking partner:

• What do you need in a financial partnership?
• Will you be the practice owner, or are you buying into a dental practice?
• What is your business operating model?

When you can anticipate your business needs, you can take a practical approach to finding a bank that can support your business growth. 

Factors Outside of Dental Practice Loan Rates

Although loan rates are important, there are other factors to consider when choosing a lender and loan. These items include the term of your loan, the amount borrowed, your monthly payment, and the loan structure (amortized vs. balloon, variable rate vs. fixed rate, and more). 

Additionally, there may be parameters of your pre-payment plan which include a penalty should you wish to switch banks. This is to recoup the interest the lender needs on the low-rate loan. If you choose a loan based solely on rate, you may be forced to pay a prepayment penalty if you realize that the lender cannot fulfill your next loan requirements and you must go with a different bank — potentially costing you more money than what you saved in the first place on the low-rate loan. 

4 Considerations When Choosing a Lender

Practice lenders and banks should do more than give you a loan. They should be supportive business partners that can assist you during the life of the loan as well as with successful business operations and growth through relevant products and services long-term. 

These are the top four considerations when deciding which lender is right for your practice:

1. Dental Practice Loan Rates & Terms 

The term of your loan will likely impact your rate. Traditionally, lenders will offer 10-year terms, but you may have 12- and 15-year term options, depending on the circumstances. 

The Relationship Between Rate & Term 

The shorter the term of the loan, the less the interest rate becomes a factor, since you can amortize the principal balance faster. 

For example, you would only pay around $62 per month in interest for every .25% on a $500,000 loan with a 10-year term if kept for the full 10 years. If you pay your loan off early, then you would be paying even less in interest. 

2. Loan and Banking Structure and Servicing 

The structure of your loan and banking services could impact the financial future of your business. 

Questions to ask include:

• Will there be fees or limits on loan payments or prepayment penalties? 
• Are there fees or limits on deposits?
• Does the lender charge for remote deposit equipment?
• Are there charges or limits for outgoing ACH transfers or wire transfers for bill payments or for incoming accounts receivable?

A practical banking architecture can improve the efficiency of handling your loan and other banking needs. Consider this value when researching your lending options.

How your loan is serviced can also impact your experience. For example, a lender that can appropriately manage unexpected needs and is easy to contact directly can give you peace of mind throughout the business relationship.

You may also wish to explore your options for business loan protection should an illness or injury prevent you from seeing patients.

3. Merchant Services Consideration 

Credit card processing — or merchant services — is essential for accepting payments from your patients. Often, these services come with fees that may not be apparent at first glance. 

It’s possible that a lender who promotes low-interest rates on loans will require you to use their merchant services. What you may make up for in low-interest loan payments, you could lose again in high merchant service fees.  

4. Ongoing Lending Support 

Before you commit to a dental practice lending agreement, find out about the lender’s capabilities for meeting your future needs. 

Support to look for could include:

Real Estate Programs 

Whether your lender is an SBA or conventional lender can impact your term and rates should you purchase a building in the future. Additionally, review the loan-to-value (LTV) guidelines for the lender to see how much is required for a down payment. 

Aside from impacting your interest rate, this risk assessment could affect the transaction cost when you decide to make this purchase. To avoid prepayment plan penalties, you’ll likely wish to use the same lender for all loans, including for real estate purchases.

Construction or Business Expansion Loans

Hopefully, your practice will grow, and you will be in the position to expand your existing location, construct a new building, or add a new location. Not all lenders can facilitate the growth of your business due to loan limits or a lack of programs to meet your needs. This could restrict business growth, and come as an unpleasant surprise if you don’t research your lender’s capabilities.  

Have your lender explain the ideal financial landscape that your dental practice should have before you open additional practices. Competent lenders can communicate what situations are likely to get loan approvals so you can work toward your goals using realistic benchmarks. 

Equipment Loans

As you manage your dental practice, you’ll likely have both expected and unexpected equipment purchases. If you know what your lender can offer as far as terms and conditions for these loans, you can move forward with less hassle. 

Have a Lending Strategy for Your Dental Practice

Ultimately, choosing a lender for your dental practice loans requires diligent research and gathering of information. While individual factors — such as interest rates — do come into play, understanding what your lender can do for you and your business can help pave the way for a successful career.

If you choose to become a practice owner, review our guide to start your own dental practice to set your business venture on the right path. 

For financial assistance, connect with the team at Panacea Financial.

About Panacea Financial

Panacea Financial, a division of Primis and member FDIC, is a financial services company for physicians, dentists, and veterinarians. 

About Treloar & Heisel

Treloar & Heisel, an EPIC Company, is a premier financial services provider to dental and medical professionals across the country. We assist thousands of clients from residency to practice and through retirement with a comprehensive suite of financial services, custom-tailored advice, and a strong national network focused on delivering the highest level of service.