Medical and dental practices have a financing profile that sets them apart from most small businesses: high-value specialized equipment, significant startup or acquisition costs, and — importantly — a generally strong, predictable revenue profile that many lenders view favorably. Here’s how to finance a practice at any stage.
What Makes Practice Financing Different
- Equipment costs are substantial, from dental chairs and imaging equipment to exam room furnishings, often representing a large share of total startup cost
- Many practices are acquired rather than started from scratch, requiring financing structured around buying an existing patient base and operation
- Revenue is generally considered lower-risk by lenders compared to many other small business categories, given consistent demand for healthcare services
- Licensing and credentialing add complexity and timeline considerations most other businesses don’t face
Financing by Practice Stage
Starting a New Practice
- SBA 7(a) loans, commonly used for combined startup costs: buildout, equipment, and working capital
- Equipment financing, specifically for major clinical equipment, using the equipment as collateral
- Practice-specific lenders, some of which specialize exclusively in healthcare practice financing and understand the industry’s revenue patterns well
Acquiring an Existing Practice
- SBA 7(a) loans, frequently used for practice acquisitions, since the loan can cover the purchase price, working capital, and any needed equipment upgrades in a single package
- Seller financing, where the outgoing practice owner finances part of the purchase price directly, often used alongside a bank or SBA loan to bridge a valuation gap
Expanding or Adding a Location
- SBA 504 loans, well suited if the expansion involves purchasing real estate
- Conventional bank loans, for established, profitable practices with strong financials
Equipment Upgrades
- Equipment-specific financing, since major diagnostic or clinical equipment (imaging machines, dental chairs) often has a long useful life that justifies traditional equipment financing over leasing
What Makes Lenders View Medical and Dental Practices Favorably
- Historically strong repayment performance as a category, given consistent demand for healthcare services regardless of broader economic conditions
- Predictable revenue streams, particularly for practices with a mix of insurance-based and recurring patient relationships
- High-value collateral in the form of specialized equipment
- Many lenders, including several SBA Preferred Lenders, have dedicated healthcare practice lending programs with underwriting specifically tailored to this industry’s financial patterns
What Lenders Will Evaluate
- Practice financials or projections, including patient volume, payer mix (insurance vs. self-pay), and historical revenue for acquisitions
- Provider credentials and licensing, confirmed and current
- The specific practice or location’s local market, including competition and demographic demand
- For acquisitions: a valuation of the practice being purchased, often requiring a professional practice appraisal
Typical Costs to Plan For
- New dental practice startup: often $400,000–$700,000+, heavily weighted toward equipment and buildout
- New medical practice startup: varies enormously by specialty, from a few hundred thousand to well over $1 million for equipment-intensive specialties
- Practice acquisition: typically priced as a multiple of the practice’s earnings or revenue, varying significantly by specialty and location
Common Mistakes When Financing a Practice
- Underestimating working capital needs during the ramp-up period after opening or acquiring a practice, before patient volume stabilizes
- Not obtaining a proper practice valuation before an acquisition, risking overpayment or financing based on inaccurate figures
- Overlooking practice-specific lenders, who may better understand the industry’s revenue patterns than a general-purpose bank loan officer
- Delaying financing conversations until credentialing and licensing are nearly complete, when starting the financing process in parallel can save meaningful time
Frequently Asked Questions
Is it easier to get financing for a medical practice than for other small businesses? Often, yes — lenders generally view healthcare practices favorably given consistent demand and typically strong repayment history as a category, though individual approval still depends on the specific practice’s financials and the provider’s credit profile.
Can a new provider with no practice ownership experience get an SBA loan to start a practice? It’s possible, particularly with strong personal credentials and a solid business plan, though lenders will weigh clinical experience and any prior practice management background as part of the overall risk assessment.
Should I use seller financing when acquiring a practice? It can be a useful tool to bridge a valuation gap or demonstrate the seller’s confidence in the practice’s ongoing value, often used alongside — rather than instead of — a primary SBA or bank loan.
Conclusion
Medical and dental practices generally benefit from favorable lender perception given the industry’s consistent demand and repayment history, making SBA loans and practice-specific lenders strong options whether you’re starting, acquiring, or expanding a practice. Given the complexity of equipment costs, credentialing, and (for acquisitions) practice valuation, working with a lender experienced specifically in healthcare practice financing is often worth prioritizing over a general-purpose bank loan officer. For a broader look at equipment financing specifically, see our guide on [equipment financing for hardware and industrial startups].