How to Choose a Lender

dentist working on patient

Obtaining a loan to finance a dental practice, whether to acquire or grow a business, is only made possible with the help of the right bank. As with all major life decisions, you’ll want to work with whom you feel most comfortable, not necessarily who offers the lowest price for their services. Here, we lay out your options.

Local

The obvious reason to choose a local bank is that your lender is more likely to know the local market and is known to have a better relationship with its borrowers. In fact, your business relationship could cross over, and the banker could become a patient of yours. A local banker can also make faster decisions on funding with fewer obstacles to face.

Regional/National

A larger company has the potential to become a long-term strategic partner, especially if relocation is an option since the bank is likely to have a large presence in many states with multiple branches. A higher number of transactions means the process is more streamlined than at a smaller bank, and a larger bank can typically offer lower interest rates because of the high volume of loans in the organization.

Dental-specific bankers

No one knows your needs more than a bank with a division specific to dental loans. They’re guaranteed to have the best rates and terms for this reason. These rates are only available to dental and medical professionals since the bank knows the loan will be paid due to the nature of the business. They also typically have the fastest underwriting process, ask for very little collateral, and offer 100% financing, all without having to deal with the Small Business Administration (SBA).

Small Business Administration

The SBA originated with the intent of allowing banks the leverage and ability to finance businesses and practices that would normally be turned down for a loan. Federal insurance, however, means there are fees associated with this type of loan. While the underwriting process can typically take longer, it is a great option for those also looking to secure real estate.

Equipment loan

This is the equivalent of getting a home equity loan with your mortgage to make improvements on your house. The bank incentivizes you to purchase the equipment with exceptional rates, similar to the process of leasing a car. The only collateral given is the equipment being purchased, and terms are typically done with five years.

What’s next?

Read more about assembling your advisory team in our e-book for recent graduates, learn more about the top banks for dental practice loans, then contact the experts at Professional Transition Strategies for referrals and recommendations.

Why Sell Your Dental Practice to a DSO?

dentist and patient smiling

Dental service organizations (DSO) have gotten a negative reputation because of their seeming corporate interest. Most dentists open their own practices to focus on the clinical side and patient care, which is why, in fact, a DSO might be a good fit. Here, we break down why this might be the case and who might benefit from selling to a DSO.

What is a DSO?

A dental service organization is an independent business support center that contracts with individual dental practices to manage non-clinical operations. Simply put, that means you get to focus on your patients and the clinical side of your practice with professional office management to handle the human resources, billing, staffing and all the other aspects that come along with owning a business.

Types of DSOs

DSOs can acquire as few as five practices in their group or as many as 45. So, depending on the burdens of the practice you are willing to let go of, there’s a DSO that will pick up those tasks. Say you still want full control of all clinical decisions related to your practice of dentistry but don’t want to deal with payroll — there’s a DSO for that.

Who should sell to a DSO?

DSOs fit the dentist who craves a work-life balance. Working 32 clinical hours instead of six days a week with early mornings is appealing to both the younger and older generation. Plus, the money made doesn’t go toward various expenses like when owning your own business. In fact, with multiple practices under one roof, equipment and supplies are usually sold for a better deal. For those looking to ease into retirement, working for a DSO can offer an abbreviated schedule rather than the added stress of a transition to another dentist.

Valuation of a DSO

Typically, a DSO’s valuation of a practice comes out higher than an individual’s. Not only will your practice value for more if selling to a DSO, but you also have the option to stay on and earn a salary, unlike with a straight buy-out. Not to mention, DSOs already have financial backing versus the unknown of the underwriting process when an individual buyer is being financed through a bank.

The future of DSOs

Currently, the American Dental Association estimates that 7.8% of dentists now belong to a DSO. DSOs have gained momentum over the last decade thanks to a new generation of dentists, and it is believed that DSO penetration can reach 30% of the dental market by 2021.

What’s next?

Contact the experts at Professional Transition Strategies to learn more about the different transition options for your dental practice.

Associateship, Partnership or Buy-Out: Which Is Right for You?

computer and coffee cup

There comes a time in the life of a dentist’s practice when a second set of hands would be helpful to grow or pass the torch to another professional. A natural first thought is to bring on an associate with plans to buy out at a later date, but the numbers prove otherwise. Here, we break down the nuances of an associateship, partnership and buy-out to help point you in the right direction.

Associateship

When selling to a partner with whom you’ve never worked with an arrangement to buy in at a later date, the results are predictable—a 20% success rate, in fact. Not to mention, after the cost of acquiring a practice and the overhead of running a business, taking on an associate is typically not an affordable option. If going this route, make sure there’s a contractual “out” should the match not be a good fit so no time or money is wasted.

Partnership

With a 60% success rate, a partnership offers flexibility in transitioning for a seller who is not ready to retire. Increasing costs of regulations and decreasing reimbursements from PPO plans make financial sense for taking on a partner. Planned well, and a partner could expand the offerings of your practice, adding to its value when the time comes to sell. For those working toward retirement, selling a fraction upfront could help to reduce hours and shift responsibility, eventually leading to a 100% buy-out. And with the growing number of dental graduates every year in an ever-stable industry, a compatible partner is likely easy to come by.

Buy-out

A full sale or purchase is the most common way to transition in or out of a practice, and for good reason—a 99% success rate is a good bet for both the buyer and the seller. The transition is quick, with one buyer and one transaction, so a good option for a retiree. However, most dentists struggle with the thought of quitting so abruptly and opt to ease the transition when given the choice. The emotional investment in the company is hard to deny, no matter your age.

What’s next?

Read more about associateships, partnerships and buy-outs in our e-book “Strategies for Transition,” then talk to the experts at Professional Transition Strategies to figure out which option is best for you.

7 Types of Dental Practice Transitions

dental mold

By now, you’ve probably already decided that selling your practice is the best option, whether it’s for retirement or managerial purposes. But maybe you don’t know or haven’t started exploring all your options yet. Here, we break down the types of dental practice transitions in an effort to help you figure out which is best for you and your business.

Buy-out

buy-out is exactly what it sounds like: when a purchaser buys your practice for a negotiated price. A relatively short transition period that typically only lasts three months is ideal for a prospective retiree. The seller may agree to stay on part-time to help ease the transition for the buyer, employees and patients.

Buy-in

A buy-in is the opposite of a buy-out in which a specific buyer purchases a defined portion of the practice for a negotiated amount determined at the outset. In this case, a professional dental practice broker will also perform a personality profile to ensure compatibility, in addition to a practice analysis.

Associate to buy-in

Here, a potential buyer is courted by a group of associates to buy-in over a defined period of time, road-mapping the ease of transition. Rather than making decisions about the future of the practice upfront, this allows time to assess compatibility; however, the division of power is the biggest consideration to make.

Associateship

A good idea in theory because associates are easy to find, and this route allows you to maintain full control over the transition; however, associateships are typically only 20% effective due to not everything being agreed upon from the outset and different expectations not being met by both parties.

Merger

Combining two dental practices to become one entity with equal partnership remains a tried-and-true method as long as compatibility is established upfront and responsibilities and income are equally divided and agreed upon.

Roll-up

This option is one that pays off in the future under the economies-of-scale principle: Multiple dental practices are purchased over a period of time to combine into one entity, which will then sell for a higher value at a later date.

Affiliation

The slowest of the transition options, this option hands over the majority of the practice to a larger entity, typically a dental service organization (DSO) or a group, with the purpose of slowly transitioning out of your practice to and giving up clinical control to the buyer.

What’s next?

Read more about your options in our e-book “Strategies for Transition,” then reach out to the experts at Professional Transition Strategies to figure out which makes the most sense for you and the future of your practice.