Ask the Expert: How to be financially prepared for practice ownership

Dear Dr. Jerkins: I recently completed dental school, and I hope to become a practice owner in the next few years. I want to build a financial foundation to be adequately prepared to reach that goal. What tips do you have for preparing financially for ownership? 
— Financially Unprepared

Dear Financially: Starting your own dental practice is an exciting goal, but it requires careful financial planning. Here's what you need to know as you prepare to take the plunge. 

1. Assess your personal financial health 
Your personal financial situation plays a big role in securing funding for your practice. Lenders will evaluate factors like: 

• Credit score: A higher score can lead to better loan terms. Review your credit report and address any issues before applying for loans. 
• Debt-to-income ratio: Keep your student loan payments manageable relative to your income. Pay down any credit card or personal loan debt as you are able. 
• Savings: Build a cushion to cover personal and business expenses during the early months of your practice. 

2. Understand the cost of starting a practice 
Opening a dental practice typically requires a significant financial investment, often $500,000 at minimum. Key expenses include equipment and technology; office space lease or purchase; design and construction; licensing, permits and insurance; marketing and branding; and working capital for initial operating costs.

3. Explore financing options 
There are several financing paths available to aspiring practice owners. Here’s a breakdown of common options: 

• Dental-specific loans: Some lenders specialize in working with health care professionals, offering loans tailored to your needs. These can include favorable terms like up to 100% financing. 
• Small Business Administration loans: These government-backed loans can be an excellent option for those who meet the qualifications. Paperwork, processing and approval can take time, so this may not be a good option if you are in need of a loan quickly. 
• Traditional bank loans: While not always dental specific, these loans are worth considering if you have excellent credit and collateral, but they may be less flexible than dental-specific loans. 

4. What to look for in a lender 
When choosing your lender, make sure you consider the following: 

• Term and rate: Term and rate impact how much you pay over time. Rate shouldn’t be your only consideration, but it should factor into your decision. 
• Structure and servicing: Because you will be working with your practice lender for 10 or more years, it’s important to find a lender that can save you time and improve efficiency. 
• Future support: If you hope to expand or improve your practice, you should find a lender who is able to support you with future loans. 
• Technology: As a busy dentist, you want a lender who has a modern banking platform that makes it easy to deposit, withdraw and move money around. 

5. Securing your future 
Starting your own practice is a major financial commitment, but with proper planning and the right team, it’s a rewarding investment in your career. 

Panacea Financial is ready to help you reach your ownership and career goals. Learn more at panaceafinancial.com/ada. 

Dr. Jerkins is the president and co-founder of Panacea Financial and a practicing physician in Little Rock, Arkansas. Panacea focuses on providing world-class financial services for dentists, physicians and veterinarians through all stages of their training and practice. It offers a full suite of banking and technology solutions specifically built for doctors, by doctors. Panacea is endorsed by ADA Member Advantage as the exclusive provider of practice financing, which includes partnership buy-ins. It is a division of Primis Bank and insured by the Federal Deposit Insurance Corporation.