Should You Choose a National or a Local Bank for Dental Practice Financing?

Are You Buying a Dental Practice?

National Banks

Big time banks such as Wells Fargo and Bank of America first come to mind when contemplating dental practice financing, and for good reason.

National banks offer some terrific dental loans. Be aware of the following pros and cons to using a big bank for your funding.

Pros of Choosing a National Bank

• Offer standardized business loans available nationwide
• Can provide large loan amounts
• Have programs to facilitate SBA loans and other government-backed financing options
• Some have specialized dental lending programs
• Business savings and business checking accounts are available at all locations
• Large national ATM networks provide fee-free cash access options across the country
• More sophisticated treasury management and loan management services
• National infrastructure allows for mobile banking and online banking
• Personal banking, personal checking, and personal credit card services are available nationwide
• Can have dedicated dental lending divisions with expertise in financing practice acquisitions

Cons of Using a National Bank

• Less customization for individual business banking needs
• Stricter approval requirements and criteria
• Less knowledgeable about local community needs
• Harder to establish relationships with bankers

Who Is a National Bank For?

National banks are great financing partners for dental practices with big visions. If you want to expand your services, acquire multiple locations, or provide cutting-edge treatments, a national bank can power your growth.

Say your goal is to open five new pediatric dentistry offices that provide orthodontics and sedation dentistry. This expansion requires serious capital. A national bank has the deep pockets to fund such large-scale growth. They offer multimillion-dollar loans to turn ambitious ideas into reality.

Or perhaps you operate a successful cosmetic dentistry practice and want to add new practitioners, overhaul equipment, and extensively remodel your office. These upgrades may require financing beyond what local banks can offer. National banks have the resources to finance major expansions.

National banks also work well for corporate dental practices. Chains with multiple locations across many states need lenders with a broad national footprint. National banks provide convenient access to banking services from any office and understand the needs of complex corporate entities.

Local Banks

Local banks can sometimes be excellent allies for dental practice purchases. They are deeply rooted in your community and often offer tailored practice financing solutions.

Community banks can be valuable partners who understand your needs. With their localized focus, personalized attention becomes the cornerstone of your journey.

The financing scope of local lenders might be more limited compared to national counterparts. Their resources and array of services could be narrower, which could potentially impact the scale and speed of your practice’s growth. 

Pros of Choosing a Local Bank

• More customizable dental practice loans
• Local experts understand the regional dental industry
• Faster financing timelines—can be within six months
• Potentially more flexible on credit scores and financial history
• Loan terms such as monthly payments can be customized
• More invested in the area
• Personal relationships for easier communication
• Can facilitate introductions with key people in your community for faster growth and opportunity

Cons of Choosing a Local Bank

• Less ability to provide large loan amounts
• Fewer business banking services like treasury management
• Dental lending expertise may not be as specialized
• Narrow access to ATMs outside of your primary location
• Higher risk of acquisitions by larger institutions
• More susceptible to the impacts of local economic disruptions

Who Are Local Banks for?

Local banks can be great partners if their downsides are acceptable. If you want to grow your services for neighborhood families while staying true to your hometown, a local bank understands and can help.

If you want to nurture personal connections, honor tradition, and invest in your local community, then a local bank might be a good financing partner.

Do You Need Help Choosing a Bank for Your Dental Transition?

Do you find it hard to navigate the world of banking? Take a deep breath—we’re here to guide you through this maze. The decision between a local or national bank might seem complex, but we’re here to simplify it and help you decide.

Local banks offer that personal touch, speedier processing, and a sense of community, while national banks bring an array of valuable resources to the table. Consider your practice’s financial plan and what types of lenders align with your vision.

We’ve helped numerous clients like you not only navigate banking decisions but also various other aspects of dental practice acquisition. From comprehensive financial analysis to practice appraisal, we’ve got your back.

Need assistance with purchase term negotiations or someone to help you handle the dental practice acquisitions and transitions delicately? You can count on us.

Let’s chat about your needs and create a strategy that ensures a seamless and successful transition. Your journey to owning a thriving dental practice doesn’t have to be stressful—we’re here to make it smooth and rewarding.

Things to Do Before You Get a Banking Loan for a Dental Practice

Here are some key steps on the path to dental acquisition funding:

1. Evaluate your financial health, including credit score, assets, and liabilities.
2. Craft a compelling business plan that outlines your goals, projections, and repayment strategy.
3. Collect essential documents like tax returns, financial statements, and practice details.
4. Research lenders to find one aligned with your needs.
5. Identify valuable assets to secure the loan, which bolsters your application.
6. Reduce existing debts to improve your financial profile and loan eligibility.
7. Address any credit issues and work towards an impressive credit history.
8. Seek advice from dental-specific financial experts (such as Dental Buyer Advocates) for tailored insights.
9. Set aside a substantial down payment to strengthen your loan application.
10. Connect with lenders early to establish rapport and understanding.
11. Ensure all paperwork is organized and ready for submission.
12. Be ready to answer queries about your practice, experience, and repayment ability.
13. Thoroughly comprehend loan terms, interest rates, and repayment schedules.
14. Conduct a practice valuation to determine its worth and make informed financial decisions.
15. Apply for pre-approval to gain clarity on your borrowing capacity.
16. Present yourself professionally, as lenders evaluate your credibility.
17. Develop a post-loan budget that accommodates repayments and operational costs.
18. Address potential red flags and provide solutions in your application.
19. Showcase your vision for practice growth, emphasizing its potential success.
20. Be ready to negotiate terms, especially interest rates and loan structure.

Questions to Ask the Lenders

When you meet with potential lenders, come armed with smart questions. This helps you evaluate if they understand your dental practice and can meet your financing needs. Here are some important questions to get the conversation going:

• What types of dental practice loans do you offer? Are there different options in terms of amount, repayment timeline, and interest rates?
• How long have you been providing financing to dentists? Do you have experience with loans specifically for practice acquisitions?
• What is the process and timeline for loan application and approval? When can I expect a decision?
• What credit criteria and financial ratios does your bank use to assess loan applications?
• What down payment amount or collateral do you require for a dental practice acquisition loan?
• Do you offer fixed or variable interest rates? How do you determine the rates?
• Are there any upfront or recurring fees associated with the loan?
• How long can the interest rate be locked in? Is there a charge for this?
• What flexible options exist for repaying the loan if cash flow becomes tight?
• What support does your bank provide after the loan is funded?
• What happens if I need to sell the practice? Can the loan be transferred?

Start an open dialogue and learn if a lender understands your goals and can craft solutions tailored for your dental practice. Don’t hesitate to ask plenty of questions now—it helps prevent surprises later on.

Let Us Be Your Dental Practice Acquisition Quarterback

The ability to purchase a dental practice is a wonderful milestone, but the acquisition process can easily overwhelm you. Leave the stress to the professionals—contact our team for a free consultation today!

With decades of combined experience, we quarterback the entire purchase process so you can invest in a successful dental business with confidence. Our proven process enables smooth acquisitions on the best possible terms.

• Initial dental practice valuations
• Comprehensive due diligence
• Financing coordination and terms negotiation
• Purchase agreement optimization
• Dental transitions support

Our full-service guidance empowers you to realize your vision of practice ownership. We negotiate on your behalf, so you can focus on delivering excellent patient care and growing your new practice from day one.

Choose your bank wisely and fulfill your entrepreneurial dream with Dental Buyer Advocates. Let us guide you on the fast track to acquiring your own successful dental practice.

FAQ on Dental Practice Transitions

What is the default rate for dentists?

A default rate is the percentage of loans or credit obligations that have not been repaid by borrowers as agreed, which leads to a situation where the borrower is in default. The default rate for dentists is relatively low, with the majority maintaining strong financial stability.

What is the average profit margin for a dentist?

The average profit margin for dentists can be quite high. Dentists often achieve a healthy average profit margin due to consistent cash flow, particularly in specialized fields like oral and maxillofacial surgery.

What is the maximum default rate for dentists?

The maximum default rate for dentists is a crucial benchmark that dental practitioners aim to keep well below industry averages. A low default rate ensures the financial stability of a dental practice.

With a default rate significantly lower than industry norms, dental practitioners can establish a solid foundation for their practice’s financial health. This prudent approach helps mitigate potential risks and ensures that the practice remains resilient even in challenging economic circumstances.

What is a good EBITDA for a dental practice?

Earnings before interest, taxes, depreciation, and amortization (EBITDA) is a financial metric used to assess the profitability and operating performance of a business. A good EBITDA for a dental practice varies, but generally falls between 15-25%, which reflects a healthy financial performance.

Will my student loan from dental school affect my ability to get a dental loan?

Your student loan from dental school can influence your ability to get a dental loan. Lenders assess your debt-to-income ratio to evaluate your creditworthiness, so a large student loan could hinder your chances of getting a dental loan.

What is a home equity line of credit?

A home equity line of credit (HELOC) is a loan option that lets homeowners borrow against the equity in their property, providing a flexible source of funds for various purposes, including dental practice acquisition.