If you’re ready to start your own practice, one of the biggest challenges you’ll face is finding the right funding. I’m Derek Leonard, “The Dental Startup Guy” and today, I’m going to help you understand the different lending sources available to you. This is part of Phase 1 of my SPEED formula: S—Secure the Funds.
Traditional Banks: Your First Stop for Securing Practice Loans
When it comes to securing funds for your practice, traditional banks are often the first stop. Banks usually provide loans for construction, equipment, and working capital. These types of loans are structured to cover the most essential aspects of starting your practice—everything from building out the space to purchasing equipment and covering expenses until you turn a profit.
However, traditional banks tend to have strict lending requirements, including a solid credit score, a comprehensive business plan, and strong financial projections. If you meet their criteria, you’ll likely get access to loans with favorable interest rates and repayment terms.
Private Funding: A Flexible Lending Option for Practice Startups
Private funding can be an excellent alternative if traditional bank loans aren’t available to you. Private investors may offer more flexibility with their lending terms, but they also expect a solid business plan and a clear path to profitability. The benefit of private funding is that you may be able to negotiate more favorable or flexible terms depending on the investor.
While private funding can be a lifeline for some, it’s important to remember that this option often requires giving up some equity or offering a higher return on investment to the lender. Be sure to weigh the pros and cons carefully before going this route.
SBA Loans: A Government-Backed Solution to Secure Practice Funding
If you’re struggling to secure a loan from a traditional bank, consider exploring a Small Business Administration (SBA) loan. SBA loans are government-backed, meaning they are less risky for lenders, which increases your chances of approval. These loans can cover various startup expenses such as real estate, construction, equipment, and working capital.
One of the most popular SBA loans for healthcare practices is the SBA 7(a) loan, which offers long repayment terms and lower down payments. However, the application process can be more time-consuming, and you’ll need to meet certain eligibility requirements. The benefit is that SBA loans generally offer competitive interest rates and terms, making them a great option for practice owners.
Equipment Financing: Focused on What You Need to Operate
If you don’t need a full-scale loan but still need funding for high-cost items like dental chairs, X-ray machines, or IT systems, equipment financing could be a smart choice. This type of loan is specifically designed to cover the cost of equipment, and the equipment itself often serves as collateral, which lowers the risk for lenders.
The main advantage of equipment financing is that it allows you to spread out the cost of expensive items over time, so you don’t have to drain your cash reserves. Plus, approval is generally easier and quicker than with traditional loans, as lenders focus primarily on the value of the equipment rather than your overall creditworthiness.
Alternative Online Lenders: Fast and Convenient
In today’s digital age, many healthcare professionals are turning to alternative online lenders for practice financing. Companies like Kabbage, Fundbox, and OnDeck specialize in providing small business loans quickly and with less stringent requirements compared to traditional banks. These online platforms offer loans for various needs, from working capital to equipment and expansion costs.
One major benefit of online lenders is speed. The application process is typically straightforward, and you can receive funding in as little as 24-48 hours. However, be aware that the convenience often comes with higher interest rates. So, while these loans are great for short-term financing needs, they may not be the best option if you’re looking for low-cost, long-term funding.
Whether you’re considering traditional bank loans, private investors, SBA loans, equipment financing, or alternative online lenders, the key is finding the right fit for your practice’s needs. Want to learn more about securing the right funding for your dental or healthcare practice? Download my free book, Startup 101: Ignite Your Practice, for a comprehensive guide on how to navigate the funding process. If you’re ready to take action and find the best funding option, book a discovery call with me today, and let’s discuss how we can get your practice off the ground.