Can You Get an SBA 7(a) Loan for a Dental Office?
SBA 7(a) loans are available for all kinds of uses for dental practices, from financing working capital to even the construction of a new building. Find out more.
There are around 200,000 dentists across the United States, many of whom are looking to start, expand, or purchase a dental practice. If you’re one of them, an SBA 7(a) loan could be a great way to get the financing you need. SBA 7(a) loans are available for all kinds of dental practices, including orthodontists, periodontists, endodontists, and oral and maxillofacial surgeons.
How SBA 7(a) Loans Can Help a Dental Practice
SBA 7(a) loans are offered by a variety of different lenders, including banks, credit unions, and online lenders. They offer terms up to 25 years for commercial real estate, and loan amounts up to $5 million.
Since SBA 7(a) loans can be used for working capital, some dentists chose to use them for purchasing dental equipment, as well as other expenses, such as marketing and employee salaries. In many cases, dentists may need to invest $350,000 or more into starting their own practice, and an SBA loan may be able to provide part or all of that financing.
Specifically, SBA 7(a) loans can be used for any of the following.
Buying Out a Dental Partner
When one or more dentists decide to retire from a dental practice or move to another location, it’s common for the other partner or partners to purchase their stake in the practice— but they might not always have the cash to do so, and an SBA 7(a) loan may be able to help.
Building a New Dental Practice
Almost all new construction costs can be funded by an SBA 7(a) loan, including furniture, lighting, security systems, and even landscaping.
Refinancing a Dental Practice
SBA 7(a) loan funds can be used for refinancing the debt on a current dental practices. However, the debt must have been used for purchases that would be eligible under SBA guidelines (i.e. real estate, working capital, and not personal expenses.)
Buying or Expanding a Dental Practice
SBA 7(a) loans can be used to purchase existing dental practices, or to expand a dental practice that you currently own.
Buying Dental Equipment
Dentists can use SBA 7(a) loans to purchase dental equipment, but usually only as part of a larger SBA 7(a) loan.
Case Study: Updating a Dental Practice in New York
Terry, an experienced dentist, had been operating her successful dental practice, Albany Smiles, in Albany, New York, for several years. Her practice offered a wide range of dental services, including general dentistry, orthodontics, and cosmetic dentistry. As her patient base grew, Terry realized that she needed to expand her practice to accommodate the increasing demand for dental services in the area.
To fund the expansion, Terry planned to renovate her existing dental office, add more treatment rooms, and invest in cutting-edge dental equipment to improve patient care. She estimated that she would need a loan of about $650,000 to cover the costs of the expansion and equipment upgrades.
Terry decided to apply for an SBA 7(a) loan to finance her dental practice expansion, given the program's competitive interest rates, longer repayment terms, and flexibility in using the funds for various business purposes.
She prepared a comprehensive business plan, outlining her expansion strategy, projected revenue growth, and market analysis. Terry also provided financial statements that demonstrated her practice's strong financial performance and stability.
Terry submitted her loan application to a local bank experienced in working with small businesses and healthcare providers. The lender reviewed her business plan and financials, recognizing the potential for Albany Smiles to grow and meet the increasing demand for dental services in the community.
The lender approved Terry's SBA 7(a) loan application, granting her the $650,000 needed to expand her dental practice. With the additional funding, Terry was able to renovate her office, add more treatment rooms, and purchase advanced dental equipment to enhance her patients' experience.
Thanks to the support of the SBA 7(a) loan program, Terry's dental practice, Albany Smiles, continued to thrive and serve the growing dental needs of the Albany community.
This is a fictional case study provided for illustrative purposes.
Other SBA Loans
While SBA 7(a) loans are great, they might not be the right choice for every dental office. In particular, larger dental practices may find that the SBA 504 loan is a better fit, especially if they primarily want to use the funds to purchase real estate and build a new dental practice. While SBA 504 loans can’t be used for working capital, they do allow slightly larger loan amounts than 7(a) loans (up to $5.5 million), and have substantially lower interest rates than SBA 7(a) loans.
What are the requirements for an SBA 7(a) loan for a dental office?
The basic terms for SBA 7(a) financing for dental practices include:
- Loan Size: $30,000 - $5 million (some exceptions for smaller loans may be granted)
- Loan Purpose: Loan can be used for financing commercial real estate, equipment, and working capital
- Loan Term:
- Real Estate: Up to 25 years
- Equipment: Up to 10 years
- Working Capital: Up to 10 years
- Credit Score Requirement: 660 minimum
- Collateral: Additional collateral is often required
- Documentation: Documentation for SBA 7a loans for dental practices is extensive, and includes:
- Year-to-date balance sheet
- Business tax returns (for the last 2 years)
- Business licenses
- Personal tax returns and resumes for 20%+ owners
- Projected financial statements (1-3 years)
What are the advantages of an SBA 7(a) loan for a dental office?
The SBA 7(a) loan is a great choice for dental offices because it can be used to fund both working capital, equipment, and owner-occupied commercial real estate. Working capital and equipment loans typically have terms of up to 10 years, while commercial real estate loans have terms of up to 25 years. Additionally, the loan size can range from $30,000 to $5 million, and the credit score requirement is 660 minimum.
SBA 7(a) loans can be used for:
- Purchasing equipment
- Buying out a partner
- Refinancing business debt
- Purchasing or expanding a dental office
What are the disadvantages of an SBA 7(a) loan for a dental office?
The disadvantages of an SBA 7(a) loan for a dental office include:
- Lengthy approval times (for standard SBA 7(a) loans)
- Lots of documentation
- Collateral is often required
- Certain businesses, including real estate investing, lending, gambling, and speculation are prohibited
- High credit scores are typically required (typically 680+)
- May be restrictions on supplemental/additional financing
How long does it take to get an SBA 7(a) loan for a dental office?
The SBA 7(a) loan process typically takes between 30 and 90 days, depending on the complexity of the loan and the amount of paperwork involved. The SBA 7(a) loan application process can be lengthy and complex, so it's important to be prepared and organized when applying. The SBA 7(a) loan application process includes:
- Completing the SBA 7(a) loan application
- Submitting the required documents
- Submitting the loan package to the lender
- Underwriting and approval process
- Closing the loan
For more information on the SBA 7(a) loan process, please see this article.
What documents are required to apply for an SBA 7(a) loan for a dental office?
To apply for an SBA 7(a) loan for a dental office, you will need to provide the following documents:
- SBA Form 1919 (borrower information form)
- SBA Form 912 (statement of personal history)
- SBA Form 413 (personal financial statement)
- Financial statements, including a balance sheet, profit and loss, and income projection
- Agreement to purchase the business
- Letter of intent to buy the business
- Business tax returns for the past three years
- Any outstanding business debt
- Long-term business contracts
- Documentation of business assets
- Business lease agreement
- Incorporation documents and/or business license
- Business plan
In addition, the SBA will usually order an independent business appraisal to give lenders an idea of what the true value of the business is.
The SBA allows applicants to get help (for example, from a lawyer or a translator) filling out the application paperwork, but your lender will be required to submit information about who gave you help to the SBA, so you’ll need to document who this person is as well.