Business Loans for Medical and Dental Practices: Financing Healthcare

Medical and dental practices occupy a favorable position in the lending landscape. Stable demand, recurring patient relationships, and professional credentials make healthcare practices attractive to lenders. But that does not mean financing is automatic — you still need to understand what works and how to position your practice.

Whether you are buying equipment, acquiring a practice, or expanding your location, the right financing structure matters.

Why Healthcare Practices Are Attractive to Lenders

Compared to many industries, medical and dental practices have characteristics that lenders view favorably:

• Stable demand — Healthcare needs do not disappear in recessions
• Recurring revenue — Ongoing patient relationships create predictable income
• Professional credentials — Licensed practitioners have invested significantly in their careers
• Insurance payments — Predictable reimbursement from payers (though with delays)
• Equipment value — Medical and dental equipment often holds value well
• Low failure rates — Healthcare practices fail less frequently than many other business types

Common Financing Needs

Healthcare practices typically seek financing for several categories:

Equipment Financing for Healthcare

Medical and dental equipment often represents significant investment. Equipment financing is typically straightforward for practices with established cash flow.

• Dental chairs and operatories — $15,000-$50,000+ per operatory
• Imaging equipment — Digital X-ray, CT/CBCT, ultrasound
• Diagnostic equipment — Varies widely by specialty
• Treatment equipment — Lasers, surgical equipment, specialty tools
• Practice management technology — Computers, software, patient management systems

Practice Acquisition Financing

Buying an existing practice is a significant investment, often ranging from $200,000 to several million dollars. Here is what the financing landscape looks like:

• SBA 7(a) loans — Common for practice acquisitions, especially when goodwill is involved
• Conventional bank loans — For well-qualified buyers and larger transactions
• Seller financing — Often part of the deal structure, especially for transition periods
• Healthcare-specific lenders — Specialty lenders understand practice valuations

Practice acquisition loans typically require detailed financials from the selling practice, a professional valuation, and a clear transition plan. Lenders want to see that the practice cash flow can support debt service after the acquisition.

Real-World Scenario: Dental Practice Acquisition

The situation: A dentist with 8 years of associate experience wants to acquire a solo practice from a retiring dentist. Practice generates $800,000 annually with $200,000 EBITDA. Asking price: $520,000 (2.6x EBITDA).

The buyer profile: Good personal credit (720 FICO), $80,000 in savings, no business ownership experience but strong clinical skills and associate track record.

The financing structure: SBA 7(a) loan for $468,000 (90% of purchase price). Buyer contributed $52,000 down payment. Seller provided 6-month transition assistance included in purchase agreement.

The terms: 10-year term at Prime + 2.5%, monthly payment approximately $5,400. Practice cash flow comfortably covered debt service plus owner salary.

Key factors: Strong practice financials, reasonable valuation multiple, buyer skin in the game, and seller cooperation with transition.

The Insurance Reimbursement Factor

Healthcare practices deal with unique cash flow patterns due to insurance reimbursement:

• Billing-to-collection lag — 30-60+ days between service and payment
• Claim denials and resubmissions — Additional delays for disputed claims
• Patient portions — Copays and deductibles can be harder to collect
• Fee schedule negotiations — Reimbursement rates vary by payer

These patterns mean healthcare practices often need working capital to bridge timing gaps. A line of credit can smooth cash flow while maintaining the ability to meet payroll and obligations consistently.

Specialty Considerations

Different healthcare specialties have different financing profiles:

• General dentistry — Established category, lenders comfortable with valuations and cash flow patterns
• Dental specialists — Orthodontics, oral surgery, etc. may command different valuations
• Primary care — Lower reimbursements but stable patient volume
• Specialty medicine — Equipment intensity and reimbursement patterns vary widely
• Multi-provider practices — Scale benefits but also key-person risk considerations

What Lenders Evaluate

Beyond standard business metrics, healthcare practice lenders focus on:

• Collections rate — What percentage of billings convert to cash?
• Payer mix — Commercial insurance vs. Medicare/Medicaid vs. self-pay
• Patient retention — How stable is your patient base?
• Production per provider — Are you operating efficiently?
• Overhead ratio — What percentage of collections goes to operating costs?
• Referral sources — For specialists, where do patients come from?

Build-Out and Expansion

Practice expansion often requires significant capital for build-out and equipment. Considerations include:

• Leasehold improvements vs. owned property — Different financing structures apply
• Equipment bundled vs. separate — Sometimes more efficient to finance build-out and equipment together
• Construction timelines — Build-out financing may have interest-only periods during construction
• Working capital for ramp-up — New locations take time to reach full production

Healthcare practice financing is generally accessible for qualified practitioners. Work with lenders who understand your specialty, prepare accurate financials, and structure the financing to match your specific needs.