How do you finance a dental practice acquisition?

Why lenders like dental practices

An established dental practice has several things lenders look for and rarely find together. Patients return on a schedule, so a large share of next year's revenue is already in the recall book. Every procedure is recorded in the practice management software, so production and collections can be reported by provider, by month and by procedure rather than reconstructed from bank statements. And the buyer is a licensed professional who could earn a living as an associate if the practice struggled, which gives a lender a fallback source of income behind the personal guarantee that most small-business buyers cannot offer.

That appetite cuts both ways. Because many lenders want dental loans, a buyer can collect term sheets quickly and choose on rate alone. The terms that matter more — how much of the price is financed, the amortization, the guarantee, prepayment, and what happens if collections dip during the transition — differ far more between lenders than the rate does.

What lenders scrutinize

Owner versus associate production is usually the central question. If the selling dentist produces most of the dentistry and leaves at closing, the buyer must replace that production personally, and patients who were loyal to the seller may drift. If associates produce a large share, the question moves to whether they stay: lenders want to see their employment terms and whether any non-solicitation protects the practice. A practice whose hygiene department produces steadily is read as more durable, because recall patients stay with the practice more than with the dentist.

Payer mix matters in two ways. A practice with heavy PPO participation earns less per procedure than a fee-for-service practice with the same production, so lenders read margins against the mix. And the buyer must be credentialed with the practice's insurance plans; if credentialing is not in place by closing, claims can be delayed and collections dip in the first months, exactly when the new loan starts. Lenders ask about it, and a buyer who starts credentialing early removes the question.

How lenders normalize a practice's earnings

The seller's P&L shows what the practice earned for the seller, including whatever the seller chose to pay themselves and run through the practice. The lender rebuilds it for the buyer: it adds back the seller's compensation and genuinely personal or non-recurring costs (see EBITDA add-backs), then subtracts a reasonable salary for the buying dentist, because the buyer's household has to live on the practice too. Related-party rent is adjusted to the actual lease, and family members on payroll who will not stay are removed, with documentation.

The result is divided by the new debt service. SBA requires debt service coverage of at least 1.15x, and from 1 October 2026 a change of ownership must show 1.25x on historical results; conventional bank lenders commonly look for at least 1.25x. In plain numbers: a practice with cash flow of 1,000 before any owner pay, less a salary of 400 for the buying dentist, leaves 600 to service debt; annual loan payments of 480 give coverage of 1.25x. If the lender judges the buyer's salary should be higher, or strips an add-back the seller cannot document, the coverage falls and so does the loan.

Lenders also run the buyer's personal cash flow. Student loans deserve particular attention in a dental file: their payments are counted in the household's obligations, and the repayment plan the buyer is on affects the figure the lender uses. It belongs on the personal financial statement and the debt schedule from the start.

SBA 7(a) or a conventional practice lender

Both are common for dental acquisitions, and neither is always better.

A conventional practice lender tends to fit an experienced dentist buying a practice with strong collections, where less equity and fewer program rules matter most; compare its amortization with SBA's before assuming either is longer. SBA tends to fit when the price is well above the practice's hard assets, when the buyer's cash is limited but a seller will go on full standby, or when the buyer's clinical experience is shorter and the lender needs the guaranty to lend. When the purchase includes the building, a 504 loan for the real estate beside a 7(a) for the practice is worth pricing against a single loan that carries both. The general comparison is on SBA 7(a) vs a conventional acquisition loan.

Compare offers on the terms that decide your first two years — the financed amount, the amortization, working capital and the guarantee — before the rate.

Associate buy-ins, partner buyouts and second practices

An associate buying the practice they already work in is among the strongest files a lender sees: the patients know the buyer, and the buyer's own production in that chair is already in the practice's records. Lenders will ask for that production history by provider, so it is worth pulling before the conversation starts.

A phased buy-in, where an associate buys part of the practice now and the rest later, or a buyout of one partner by another, is a partial change of ownership and is financed under different rules; see financing a partner buyout. A dentist buying a second practice is underwritten on both: the combined cash flow, how the owner will split time between locations, and whether the first practice can run without the owner in the chair every day.

The documents a dental lender asks for

The core is Transparent's SBA checklist; the practice-specific items are what distinguish a dental file.

• Practice tax returns for 2–3 years, the P&L for each year, a year-to-date P&L through last month-end, and a balance sheet. The latest full year is always included; lenders do not underwrite on an older year.
• Production and collections reports by provider, from the practice management software, for the same years.
• Insurance and patient receivables aging, and a payer-mix report with the main fee schedules.
• Active patient count and new patients per month.
• The lease, with renewal options and the landlord's position on assignment.
• An equipment list with approximate ages.
• The signed letter of intent, and the practice's debt schedule with copies of any notes being paid off.
• For the buyer and every owner of 20% or more: personal tax returns for 2–3 years and a personal financial statement, including student loans.
• The buyer's dental license and a resume showing clinical and management experience.

Why each of the core items matters is on what lenders need to finance an acquisition, and the SBA program itself is on how SBA 7(a) loans finance a business acquisition. The SBA's own records of 7(a) lending to dentists — how many loans, how large, at what rates and how many were acquisitions — are on our SBA loans for dental practices page.

Of the 1,800+ lenders in Transparent's book, 278 write SBA 7(a) & 504 loans and 1,148 write term & private credit, so an SBA structure and a conventional one can be priced against each other on the same practice. Once a buyer's documents are in, Transparent builds the full lender package in a day, so each lender reads the practice's production, payer mix and coverage in the same form; what the package contains is on the package.