Dental Practice Collections

Four things you need to know when starting your dental practice

Oct. 17, 2014
Having a bank to assist you with financial matters when you start your dental practice will help now and in the future.

Like other health-care practitioners, many dentists want to start their own practice with their personal vision. While having strong skills on the clinical side of dentistry is critical, it’s only half the battle. When launching a new practice, to turn small business goals into profitable realities, dentists must understand the business side of dentistry and how to obtain capital.

There are a number of things dentists should consider early in the decision-making process to obtain access to credit and thrive in their new practice:

Use a specialized health-care lender
Specialized health-care lenders have a deep understanding of dental practice. They have programs tailored specifically for health-care practitioners, and can provide financial resources throughout the life of the practice and the practitioner’s career. Additionally, many health-care specialty lenders provide 100% financing on dental practice loans. This is critical for a dentist just starting out who may not have enough money for a down payment.

Build a relationship with the bank
Think of your banker as a trusted local advisor who takes a holistic approach to helping your practice improve its cash flow by supporting your business and personal goals. This can be through such things as employee sales incentive programs or negotiating an annual medical supply cost ceiling with a distributor, helping profits by expanding the number of operations or purchasing digital equipment technology, and helping with growth by bringing in a partner or buying another practice.

Understand your cash flow
A specialized health-care lender understands that a dental practice is a cash flow business with intangible assets. The majority of value in the practice lies in the patients, staff, location, and medical provider’s reputation, all of which make up the goodwill of the practice. When a dentist applies for a business loan or line of credit, it’s important to interview lenders and ask questions to see if they can meet your needs. Can you borrow money against your intangible business assets? What are the cash flow and collateral requirements? These are the kinds of things you need to understand when you start a practice.

Personal credit is critical
Many young dentists make the mistake of not paying down their credit so they can save money for their practice loan. However, your personal credit score and demonstrating the ability to make timely payments on your large personal loans is paramount in the credit process. Banks view a health-care practitioner with a very profitable practice and a low credit score as a high-risk borrower, because the practice offers limited collateral and only modest amounts of tangible or hard assets.

While starting a practice is an exciting time in a dentist’s career, the financial responsibilities can be overwhelming. That’s why it’s critical for dentists to understand their unique needs and consult with a specialized health-care lender to ensure the transition from dental school to new practice is as seamless as possible.

Daniel Croft is head of the Healthcare Practice Solutions group, TD Bank, which assists dentists, veterinarians, and independent physicians in choosing sound financial solutions for their practices.