Usually by refinancing the whole balance sheet, not just the advances. Most practices with advances also carry a practice loan and equipment notes, and the advances often breach the practice loan's terms. A lender that specializes in dental or healthcare practices can refinance the practice loan, the equipment notes and the advances together if collections support one payment. It reads production and collections by provider, the payer mix and the owner's own chair time, because in most practices the owner is the business.
- Why practices take advances
- A collections dip after a provider leaves, an insurance change or a build-out overrun, with the practice lender already fully extended
- The first problem
- Advances often breach the existing practice loan's covenants
- What lenders read
- Collections by provider, payer mix, hygiene production, new patients
- The usual route
- One refinance of the practice loan, equipment notes and advances together
- Lenders in the book
- 1,148 write term & private credit; 278 write SBA 7(a) & 504
How a well-financed profession ends up with advances
Banks and specialist lenders compete to finance dentists, because a well-run practice's collections are steady and its patients stay for years. That competition is also how a practice reaches the advance market. The purchase or start-up is financed close to the limit of what the practice can carry. Chairs, imaging, scanners and a milling unit are financed on top. A build-out or a second location adds more. When collections then dip, there is no room left with the practice lender, and funders that market to practices fill the gap.
The dips have recognizable causes:
- An associate dentist or a hygienist leaves, and the schedule thins for months while a replacement is found and builds a patient base.
- The owner is out through illness, injury or family leave. In a practice where the owner does most of the dentistry, collections fall at once.
- An insurance fee-schedule change, or joining more PPO networks to fill the chairs, lowers what the practice collects per visit.
- A build-out or second location runs over budget and opens late, carrying rent and staff before it has patients.
- The owner's own obligations, such as a buy-in note or large student loans, draw more out of the practice than it can spare.
The first advance covers the dip. Its daily debit then takes cash the practice was using for payroll and supplies, and a second advance follows. The practice is usually not short of earnings; it is short of room in its payment schedule. See the true APR of an advance and the general mechanics on refinancing cash advances into term debt.
The practice loan comes first
A practice loan typically carries a blanket lien on the practice's assets and a set of covenants: no additional debt without consent, no other liens on the collateral, and often a minimum cash-flow coverage test. An advance taken while that loan is outstanding can breach it twice: once when it funds, as new debt with a new lien filing, and again when its debits push coverage below the covenant. Many practice loans also carry cross-default clauses, so trouble with one obligation becomes a default under all of them. See negative covenants, negative pledges and cross-default clauses.
That is why refinancing only the advances rarely works. A new lender that sits behind the practice lender needs its written consent, and practice lenders seldom give it. The realistic options are these:
| Option | When it works | What to watch |
|---|---|---|
| The existing practice lender refinances the advances | The lender knows the practice and collections have recovered | It may reprice the whole loan or tighten covenants in return for curing the breach |
| A new lender refinances everything | Collections support one payment covering the practice loan, equipment notes and advances | Prepayment terms on the existing loan; see prepayment penalties |
| A second loan behind the practice lender | The practice lender consents in writing | Few agree, and the second lender prices for its position; see first lien vs second lien |
| Forbearance while the advances run off | The breach is small and the advances are nearly paid | It buys time, not a solution; see forbearance agreements |
Tell your practice lender before a new lender does. A covenant breach disclosed with a plan reads very differently from one discovered in a lien search.
How a lender reads a dental practice
Specialist lenders read a practice through its practice-management reports as much as its tax returns. The numbers they want tell them whether the dip that started the advances is over, and how much of the practice depends on one person.
| What the lender looks at | What it tells them |
|---|---|
| Production by provider, monthly | How much of the dentistry the owner does, and whether a departed provider's production has been replaced |
| Collections against production | Whether the practice collects what it produces; a falling ratio points to write-offs, insurance problems or billing staff |
| Payer mix: fee-for-service, PPO, Medicaid | How much of each visit the practice keeps, and its exposure to fee-schedule changes |
| Hygiene production and recall | Whether the patient base is stable; hygiene feeds the restorative schedule |
| New patients each month | Whether the practice is growing, holding or shrinking |
| Receivables split between insurance and patients | Patient balances collect slowly and count for little |
Earnings are then rebuilt. The lender pays the owner a market wage for the dentistry the owner performs, adds back personal expenses run through the practice, and removes documented one-time costs of the event, such as a temporary dentist hired while the owner was out. See EBITDA add-backs. Because the owner guarantees the loan, many lenders also look at the owner's personal obligations. SBA requires debt service coverage of at least 1.15x, and 1.0x globally, including the owners, so a dentist's student loans and home mortgage enter the test; see global cash flow.
Two routes that help other industries rarely help here. Dental receivables are small relative to collections and split between insurers and patients, so an asset-based line seldom retires much of a stack. Equipment is more useful: newer imaging or milling equipment owned outright may support an equipment refinance, although used dental equipment appraises well below its cost. See refinancing equipment loans and leases.
Sizing one loan for the whole practice
| Today | After one refinance | |
|---|---|---|
| Collections over the year | 1,800 | 1,800 |
| EBITDA, with the owner paid a market wage for the dentistry | 360 | 360 |
| Practice loan payments | 150 | Paid off |
| Equipment note payments | 60 | Paid off |
| Advance debits | 240 | Paid off |
| Payment on one new loan | None | About 240 |
| Left after debt payments | Short by 90 | About 120 |
The practice earns 360 and today pays out 450. The practice loan and equipment notes on their own were affordable; the advances made the total impossible. One loan across all three brings the payments back inside earnings with room left. The new loan is about three and a half times EBITDA, at the top of what senior cash-flow lenders commonly lend, 2x to 3.5x EBITDA, which is why the lender's diligence goes into proving the 360. If provider-level production shows the dip is over, the 360 holds. If the associate who left has not been replaced, the lender sizes the loan on lower earnings, and the refinance may not cover every payoff.
The refinance works when the event that caused the advances has ended. Hire the replacement, or get the owner back to a full schedule, before going to lenders.
Where SBA fits
An SBA 7(a) loan is often the cheapest long-term money for a practice, and many practices were bought with one. Its rules shape the timing of an advance refinance:
- SBA will not refinance an active merchant cash advance. From 1 October 2026 an advance becomes eligible only once converted to a term loan that has amortized for at least 24 months with no new advance since.
- Refinancing the practice loan itself requires the new payment to be at least 10% lower than the old one and the loan to have been current for the last 12 months. A practice that missed payments during the squeeze fails that test until it has a clean year.
- SBA proceeds cannot refinance debt that funded a distribution to owners, so advances taken to cover owner draws are a problem twice over.
- Every owner of 20% or more personally guarantees the loan.
For most practices, then, the sequence is a conventional or specialist refinance of everything first, then SBA later if the numbers improve. See using a 7(a) loan to refinance existing debt, refinancing an existing SBA loan and the data page on SBA loans for dental practices.
Preparing the file
- Business tax returns for two to three years, the P&L and balance sheet for the last full year, and a year-to-date P&L through last month-end.
- Personal tax returns and a personal financial statement for each owner of 20% or more.
- Production and collections by provider, monthly, for the last two years, from the practice-management system.
- Payer mix, and a receivables aging split between insurance and patient balances.
- The practice loan agreement, equipment notes and leases, and a debt schedule listing them all.
- Every advance agreement, a current payoff letter from each funder, and bank statements for every month the advances have been debiting.
- Associate agreements and the office lease.
- A short written account of what caused the dip and what has changed: the replacement hired, the owner back to a full schedule, the fee schedule renegotiated.
Transparent builds the lender package for these files (financing model, lender presentation, blind teaser and underwriting memo) in a day once the documents are in, and writes it to lead with collections, provider production and coverage on one payment rather than with the advances. The broader approach is on MCA refinancing. Once the practice is on one loan, a modest line of credit is what lets it absorb the next departure without a funder.
Common questions
- Will my practice lender call the loan because I took advances?
- It can, if the advances breached the loan agreement. Most practice lenders would rather see a plan than call a loan to a working practice, which is why disclosing early, with a refinance in progress, usually goes better than waiting to be found.
- Will a specialist dental lender refinance cash advances?
- Some will, usually as part of refinancing the whole practice rather than as a separate loan, and only once the cause of the advances is over. The file has to show collections recovering by provider.
- Do my student loans affect the refinance?
- Often. Because owners guarantee practice loans, many lenders look at the owner's personal obligations, and SBA tests coverage globally, including the owners, at 1.0x. Large personal payments reduce what the practice can borrow.
- Can equipment leases be folded into the refinance?
- Frequently, if the lessor gives a payoff and earnings support the larger loan. Some leases are cheaper to leave in place; compare the payoff with the remaining payments before deciding.
- Is selling to a group a better way out?
- That is an ownership decision, not a financing one. A refinance keeps the practice; a sale ends the problem by ending the ownership. In a sale the advances are paid off from the price at closing, so they alone are not a reason to sell.