A practice loan for a dental buy-in usually covers the price of the share being bought, which reflects the practice's equipment, patient base and goodwill, and sometimes working capital for the transition. Equipment and remodels are often financed separately. The loan is repaid from the new partner's share of the practice income.
An article from Brookharbor Lenders in Charleston, West Virginia on dental buy-in and practice loans, with Kanawha County dental counts and an invented one-third buy-in example.
Dental Practice Acquisition Loans: Patient Base, Equipment Age and the Lease
A buy-in price usually rests on a valuation of the whole practice: its collections over several years, the size and loyalty of its patient base, the age of its equipment and the terms of its lease. A partner reviewing an acquisition loan reads the same things, because they decide whether the income will repay the loan.
Patient base carries a great deal of weight. A practice whose patients are loyal to the practice, not just to the selling dentist, keeps its income after the sale. Equipment age matters because old chairs and imaging will need replacing soon, adding a second loan. The lease matters because a practice without a secure location is worth less.
The dental office loans page covers the acquisition checklist in more detail.
Dental Practice Financing for Chairs, Imaging and a Remodel
Equipment and remodels are usually financed apart from the buy-in. Chairs, delivery units, sensors and imaging fit equipment financing secured by the items; a remodel of operatories or the reception area fits a term loan matched to how long the remodel will last.
Keeping them separate lets each loan run for its own useful life: a sensor might be financed over a few years, a remodel over longer. The equipment financing page explains chairs and imaging.
Dentist Practice Loans and the Collateral They Usually Need
Dentist practice loans are often secured by the practice assets, including equipment, accounts receivable and the practice itself, and a partner may also ask for a personal guarantee from the buying dentist. For a buy-in, the share being bought and the buyer's income from it are the core of the security.
Life and disability insurance may be required, because the loan depends on the dentist being able to work. Ask early what collateral and insurance a partner requires, since they affect the total cost.
Business Loans for a Dental Practice With Two Locations
A practice with two locations has two leases, two sets of equipment and staff spread across both. A loan for such a practice, or for a buy-in to one, looks at each location's results as well as the total.
If one location carries the other, a partner will want to understand why and whether it will change. A term loan for a buy-in into a two-location practice usually rests on the combined income, with the leases for both offices in the file.
An Invented Buy-In: One Third of a Practice, Paid Over Ten Years
Illustration only, invented figures: an associate agrees to buy one third of a practice valued at $900,000, a price of $300,000. The buy-in is financed over ten years at an invented annual rate of 8%.
In this invented case the buy-in costs about $3,639.83 a month for ten years; the 120 payments add up to about $436,779, of which about $136,779 is the cost of the financing (our arithmetic). The associate would compare that payment with the expected one-third share of the practice profit, after the associate's own salary, before signing.
The share of profit matters more than the share of collections. A practice that collects well but carries heavy staff, lab and supply costs may leave a thinner profit than its collections suggest, and the payment comes out of profit. The associate should ask for the practice profit and loss statements behind the valuation, not just the collections reports.
The amortization calculator reruns this for any price, rate and term.
What the Kanawha County, WV Dental Count Says, and What It Does Not
County Business Patterns counted 69 offices of dentists with employees in Kanawha County, WV in 2023, with 667 employees and an annual payroll of about $37.5 million; 18 had a ZIP 25301 address. Fourteen of the 69 had fewer than five employees.
These counts describe how many dental offices employ staff in the county. They do not show how many dentists are planning to retire or sell, and no county table does; that information comes from the practices themselves.
A Buy-In Checklist for the Associate and the Selling Dentist
- A valuation of the practice, or the method behind the price.
- Three to five years of collections and production.
- The practice tax returns for the same years.
- The equipment list with ages and any leases.
- The lease, with assignment or renewal terms.
- The buy-in agreement or letter of intent, including any seller financing.
- The associate's own financial statement and income history.
By Brookharbor Lenders · Updated
