6 Ways to Use a Dental Practice Loan for Business Growth
Running a successful, lucrative dental office is the goal of every dental professional. To do this, you must keep your patients happy and maintain your business's finances responsibly.
Sadly, affording upgrades is costly and often requires additional financing. That's why many dental practice owners apply for small business loans to help them increase their cash flow.
In this post, we'll review popular dental practice financing options. Then, we'll explore six ways that you can utilize a business loan to advance your dental practice.
What is a Dental Practice Loan?
Dental practice loans are a type of lending geared toward expanding, running, acquiring, or starting a dental practice. It's a type of medical business loan that can be either from a commercial lender or the Small Business Administration. Business loans for dentists are an important tool to help those businesses with cash flow, buy expensive equipment, upgrade software, and more.
How Do Dental Practice Loans Work?
When your business applies for dental practice finance, it helps to know a few things. What do you want to use the lending for? How much do you need? Do you want a one-time loan or something like merchant cash advances that can help you in between insurance payments? Understanding your goals with financing will help businesses like yours decide the best direction to go in.
Additionally, knowing the nuances between a dental practice loan vs medical practice loan will help you determine if you need one as specialized for your dental business. Loans for dentists are used specifically for this type of medical business while medical business loans can be geared toward multiple different types of medical companies.
When you apply for dental practice loans you'll often get to choose between many different lending types including installment loans, merchant cash advances, dental equipment financing, and debt consolidation. The value of the loan and the repayment terms will depend on several factors including your time in business and your annual revenue.
6 Business Financing Options for Dentists:
When you applied for dental schools, you probably weighed all of your options. You should adopt the same research process when evaluating the funding options for your dental practice. All business owners are different, so it's important to research numerous financing options. By doing this, you can apply for one that best fits your practice's needs.1. Traditional Bank Loans
Most banks offer business loans, but they can be challenging to obtain. If you have a low credit score or own a new business, it's unlikely that you'll be approved. If you're interested in this type of financing, we suggest contacting the bank first to learn about the prerequisites. That way, you can pursue other business financing options if it's evident you won't qualify.
2. Loans from Alternative Lenders
If you're interested in pursuing a business loan for your existing practice, you should research alternative lenders. Many online lenders offer long- or short-term financing, depending on the applicant's needs.
3. Small Business Administration (SBA) Loans
If you've pursued other loan options but haven't gotten approved, you may qualify for an SBA loan. The SBA provides financing to business owners that haven't been able to get funding elsewhere. Typically, these loans come with low-interest rates and affordable monthly payments.
4. Credit Cards
Some dental practice owners use business credit cards to afford business costs. Of course, it's crucial that you pay off your balance on time and ensure that you aren't overusing your card.
5. Dental Equipment Financing
If you need new dental technologies, accessing an equipment loan can be very beneficial. However, it's important to remember that you'll only be able to use the loan funds to pay for equipment costs.
6. Line of Credit
In some cases, dental office owners benefit from lines of credit to fund their operations. When you take out a line of credit, you can borrow against your approved loan amount as needed.
How Your Dental Practice Can Utilize a Loan:
1. Hire Additional Employees
Your patients' time is important to them. Many patients take time off from work to attend appointments, and they should be seen on time.
If your customer base has increased, your staff may struggle to serve patients quickly and efficiently. Due to this, you should consider hiring additional personnel. A business loan could be the solution to your staffing shortage!
Once you receive a loan, you can hire more dental assistants or receptionists, depending on your practice's needs. Just think about how much more effective your dental practice could be with a few more employees!
2. Utilize Digital Marketing
If you want to use your business loan to expand your customer base, increase your online presence!
According to a recent article by Junto, 81 percent of consumers in the U.S. perform online research before making a purchase. This statistic supports the notion that not being on the Internet is no longer an option.
Consider using your small business loan to hire a digital marketing professional or recruit an agency to manage your digital strategy. Or, you could run your own digital marketing campaigns; however, you'll need some basic knowledge of digital marketing tactics.
If you choose to run your own campaigns, use your business loan to launch campaigns on Google, Bing, and Facebook. In today's fast-paced world, you can't afford to opt out of digital marketing, as it's such a lucrative way to reach customers.
3. Purchase New Equipment
Dental equipment isn't cheap, but it's imperative to perform your services and give your patients the best possible care. If your equipment is broken or outdated, a business loan could help you invest in new replacements.
Before applying for an dental equipment loan, review your business plan and cash flow statements to determine how much money is needed for equipment costs. As previously mentioned, you could take out an equipment loan to specifically fund those purchases. However, suppose you need your loan for equipment in addition to other business costs. In that case, you may want to pursue a business loan from an alternative lender.
4. Start an Expansion Project
Is your business location too small, or does your office look old and outdated? If you answered yes to these questions, consider using your business loan to fund an expansion project.
With a larger practice or another business location, you can have ample space to grow your business.
Using your term loan, you can purchase commercial real estate or use it to expand your existing location. These projects can be challenging to afford if you don't have access to additional financing, so be sure to apply and get approved for funding before starting your project.
5. Acquire Another Dental Practice
Do you want to purchase an existing dentist practice? Using your loan, you can acquire another dental practice.
Once the acquisition is complete, you'll likely inherit more patients. Due to this, you could use your loan to afford the additional expenses, which include:
- Hiring more staff members
- Expanding your office space
- Ordering additional inventory
- Pay for branding or PR services
Receiving a dentist business loan will help you accommodate your new patients and ensure a seamless transition.
6. Invest in New Technology
A great way to utilize additional working capital is to invest in technology to make your operations more efficient. For example, you could use a business loan to:
Upgrade your computer system: A new computer system can help your admin team work more efficiently. For example, you can invest in a new scheduling system or transfer your charts from paper to digital files.
Purchase tablets: Instead of having patients complete paper forms, purchase tablets so that they can submit paperwork digitally, making the sign-in process faster.
Invest in a user-friendly website: It could include a chat function, scheduling assistant, and patient management tools.
Hire a mobile developer: Recruit someone who can create a user-friendly app for your patients. This app can use to book appointments, pay outstanding bills, and learn about your practice's services.
Additional Things to Consider for Dental Practice Loans
Business loans for dentists can help practices open new locations, hire additional staff, shore up cash flow issues that occur when insurance payments are delayed, and invest in new equipment and technology. Running a dental practice comes with numerous expenses. Getting lending to cover the gaps can ensure that staff and leases always get paid on time. Some loan types come with high-interest rates so it's important to understand how repaying these loans will impact the bottom line from month to month.
What is a Good Profit Margin for a Dental Practice?
Determining the profit margin of a dental practice is very complex, but also critical. You should expect to have profits in the range of 30-40%. If your profits are any less than that, then it's important to cut costs, and take steps to improve profitability. When you're looking for a small business loan, they will be looking at numbers like this to determine if they want to lend you money or not.
How Many Employees Does a Dental Practice Need?
A small dental office would do well to have at least one receptionist, a dental hygienist, a dental assistant, and of course, a dentist. As the practice grows, adding more hygienists, assistants, and receptionists will help the office run efficiently.
Is Financing Easy to Acquire?
Yes. No. It depends. While getting merchant cash advance loans and lines of credit can be relatively simple, qualifying for larger loans to be used for buying property, building new locations, and expanding operations can be more complicated. Dental equipment loans are usually relatively easy to obtain because the equipment itself is used as collateral. The loan terms for dental practice lending will vary depending on your time in business, annual revenue, and even credit score.
How Can You Boost the EBITDA of Your Dental Practice?
Boosting the EBITDA of your dental practice will improve the value of your business. The better your EBITDA, the better your business will look to creditors and/or investors. This means that you may qualify for better rates on a line of credit for new dental practice, for equipment, and even dental office financing.
The tops five ways to boost your EBITDA are to:
Keep your prices stable by buying similarly priced supplies.
Reduce costs and unnecessary overhead.
Boost your revenue.
Create better inventory management practices.
Leverage automation where it makes sense to do so.
How Can You Calculate a Dental Patient's Lifetime Value?
If you want to improve your marketing efforts and your business profitability, you need to know your patients' lifetime values. You can do this by calculating the total amount you billed your patients over a year, and then dividing this number by the total amount of patients you had in your practice that year. This will give you the annual value of your patients. Next, you'll want to calculate the retention rate of your patients from year to year. You'll also want to calculate the referral rate of your patients. Once you have these numbers, the calculation looks something like this:
Dental Patient's Lifetime Value = (average dental patient annual value * annual dental patient lifetime) + average dental referral value
Consider an Installment Loan as an Option
Installment loans are very useful for large purchases and can be used for dental office financing, making large equipment purchases, opening a new location, and more. Installment loans for dental businesses are similar to the types of consumer loans used to purchase cars and homes. You take out a one-time loan with set repayment terms, interest rates that can be variable or stay the same, and a minimum monthly payment. These business loans for dentists can be used for any part of your dental company.
Conclusion: Use a Dental Practice Loan to Fit Your Needs
Now that you've learned about business loans for dental practices, it's time to consider how your business can improve. Every dental business is different, and you should determine your pain points before applying for dental practice financing. Loans for dentists make it easier to afford necessary costs and upgrades, which can help you serve additional customers.
