Whether you’ve already started a dental practice or you’re looking to finance one in the future, knowing what funding is available can be handy. Even established businesses can run into some financial trouble, and that’s why a variety of financing options exist.
With that in mind, what types of dental practice financing can you choose from? How could one use a dental practice business loan? These are questions you’ll get answers to in this guide.
Types of Dental Practice Financing Options
There are various dental practice financing options to choose from when deciding to borrow money. These are as follows:
Business loans
As one of the best options for securing working capital, it’s the go-to choice for anyone looking for secured finance providers or unsecured alternatives.
It’s flexible, and the funding can be used for any manner of reasons when it comes to day-to-day operations, including dental equipment and stock.
Pros
- Great for those who want a choice on whether they want to put up collateral or not.
- A variety of options to suit all types of borrowers.
Cons
- Any secured loans can risk you losing assets if repayments aren’t made on time.
Asset finance
This is ideal for those who need to purchase dental equipment for their practice but perhaps don’t have the funds to make these purchases before opening the business.
With asset finance, you can help cover those expensive costs and to help spread the repayments over time.
Pros
- Helps fund more significant purchases that some may not be able to afford.
- Doesn’t slow down your company’s progress, so you can continue to grow without delays.
Cons
- There’s a risk that you’re won’t make enough money to make a profit and make repayments.
Invoice finance
This sort of funding helps with cash flow. It enables the business to receive funding for unpaid invoices, so the money is received sooner rather than later.
This is then paid back, along with a fee, once the money has been processed through the invoice.
Pros
- Good for keeping cash flow healthy.
- Helps when chasing invoices for payment.
Cons
- Some clients may still refuse or have delays in their payment.
- Fees added to the service will be deducted from your profit.
Merchant cash advance
Another form of finance is through credit and debit card payments. The merchant cash advance takes a percentage of the sales that you make in order to pay the loan back in full.
There are no monthly payments to make, and the overall advantage of this financing is that it flows with your business transactions.
Pros
- Helps avoid high monthly payments.
- A good way to spread the costs over a more comfortable period of time.
Cons
- Your future sales payments will be temporarily impacted until the loan is paid off.
What you choose when it comes to dental practice finance is entirely up to you. Any type of business loan or alternative finance solution can help grow your business.
What Can I Use a Dental Practice Business Loan for?
A dental surgery might need business finance for a number of reasons. There are plenty of things you can use these business loans on.
New equipment – This equipment can often be expensive, whether that’s dental chairs, the equipment used in procedures, etc. A loan or financing can help pay these off in advance.
Refurbishing an existing practice – If you’ve already got a dental practice and you’re looking to improve your dental practice valuation, then the loan could be used to refurbish the property.
Expansion of the property – The same goes for expanding a property. This can be often required when you’re growing your business and you’re running out of space to expand.
Replenishing stock – It’s essential to keep a good supply of vital stock; otherwise, it can cause plenty of issues. These loans can be used to help ensure your shelves are stocked with all the right materials and medications.
Emergency repairs – Emergency repairs may be required at the most inconvenient of times. With that in mind, it’s good to consider a loan when you encounter equipment failure or repairs within the business that need addressing immediately.
There’s no end to what these loans can be used for when it comes to your dental practice. Business investment fell by around 10.7% in Quarter 1 (Jan to Mar) in 2021. Without reinvesting into your business, how can you expect your practice to grow?
Does My Dental Practice Qualify for Financing?
In order to qualify for a dental business loan, it all depends on the type of loan you choose and the lender of said loan. Here are a few criteria that your business should be hitting in order to get the best dental finance solutions possible.
- Be UK registered.
- A limited company, LLP, or a sole trader.
- You’ve been trading for over three months.
- Assets/security is available for collateral-type loans.
- An annual turnover of £10,000+.
There might be additional criteria with some lenders, but the above is fairly similar for most providers of dental practice loans.
How to Apply for Dental Practice Financing
To apply for dental practice financing, it’s always good to see what type of finance you want and the lender’s criteria. For a dental professional, you may already have plenty of paperwork to support your eligibility for a loan.
For newcomers who are only just starting their business, there may be a business plan required, along with evidence of financial proof that repayments can be afforded. With that in mind, make sure you do the following when applying with various lenders:
- Collect business evidence and relevant business documents.
- Assess how much you can borrow and what you can afford to pay back.
- Apply to the lenders directly or through a broker.
- The faster you apply and respond to the process, the quicker you’ll get the money.
Can I Get Financing for My Dental Practice If I Have a Bad Credit Rating?
Even if you have a bad credit rating, getting a loan is still possible. There is plenty of business development finance that you can get. Whether you’ve got good credit or not, there will always be someone willing to lend to you.
However, what should be noted is that if you have bad finance, chances are, you’re not going to get the best options available. The lenders may be limited, and you may only see a number of lenders with higher interest rates as a result. You can check the state of your credit score on Experian.
Who Offers Dental Practice Financing?
There are lots of dental business financing providers. If you’ve been looking at raising finance as a dental practice owner, there are certainly a few avenues you could go down. A standard bank loan, for example, is a popular choice for many.
You may wish to explore private lenders or go via a broker to see what options you have across the entire market. Some lenders may be specialist finance providers, which, when it comes to the dental industry, might be handy.
Which Dental Practice Financing Option Is Right for You?
Securing finance is an experience that is unique to every dental practice. Whether you’re looking at asset finance to an unsecured cash injection, what works for your practice might not be the best for other dental practice owners.
Be sure to assess your needs when you secure working capital and don’t borrow so much that you’re getting yourself into a difficult financial situation. Weigh up your options before you make a concrete decision on which financing is best for you.
Final Thoughts
There are plenty of business loans and financing options to choose from when it comes to dental practice investments. With that in mind, take a look at the market overall and figure out which loan types are best for you and your own business.
FAQs
Am I required to use a property I own to secure dental practice financing?
When it comes to dental practices and financing, you’ll only need to secure the property as collateral for secured loans. If you’re not looking to put your assets up for collateral, then your best bet is to go for unsecured loans instead.
What R&D tax relief is available to dental practices?
For those that have their own dental practice and have been conducting research and development, R&D tax credit is available. This allows many dental practices to reduce their income tax liability for the year and file a claim to receive the refund for taxes paid over the last three years.
Can I take out a personal loan to finance my dental practice?
A personal loan can be used for almost anything, and that includes financing your new dental practice purchase. However, it’s essential to be aware that personal loans often come with a risk to your assets if your repayments aren’t made in time.
How soon can I receive a dental practice business loan?
The amount of time it takes to see the business finance you’ve selected go into your account will depend on the lender. For some, it might be a matter of hours; for others, it could take a number of days.