Ask the Expert: How do I get my startup plan approved by a bank?

Dear Dr. Jerkins: I've decided to start my own practice instead of acquiring one. I know the failure rate is higher for startups, but I've weighed the pros and cons, and I'm ready to put in the work to make it succeed. I've also heard startups are harder to get funded. What do I need to show a bank to get the financing?
— Aspiring Founder

Dear Aspiring: You're right that startups are a harder ask for a lender. With an acquisition, there's a track record for a bank to underwrite — years of tax returns and collections history. With a startup, there's none of that. That means the lender has to rely much more heavily on your projections and, more importantly, the assumptions behind them.

Those projections don't just help a lender decide whether to approve your loan. They also help you and your lender determine the right amount of financing for the practice and how that financing should be allocated between project costs (construction, equipment and technology) and working capital (payroll, rent, marketing and other operating expenses). Underestimating working capital is the No. 1 reason startups fail; you must secure enough liquidity up front to cover expenses until the practice stabilizes.

That's why the assumptions behind your projections matter so much. You need to show where your numbers come from, why they're realistic and why you're capable of achieving them.

A strong business plan answers four questions before a lender has to ask them.

1. How will you generate revenue?

This is where many dental business plans fall apart because they tend to be aspirational, not realistic. "I project $600,000 in Year 1" isn't an assumption — it's a conclusion. What separates a fundable plan is whether you can support that number, one assumption at a time. One of the strongest startup plans we've come across did exactly that:

• Patient volume and capacity: The dentist planned to work two days per week during Month 1, totaling 16 clinical hours. At 16 new patients per day over eight working days, that gave her a projected 128 new patients for the month. She also showed that she could realistically handle that volume: with an assistant taking X-rays and the dentist performing the exam and cleaning, she estimated about 30 minutes of her time per patient.

• Revenue per patient: The dentist estimated $200 per patient for initial exams, including X-rays and cleanings. This amounted to $25,600 in Month 1. She then estimated an additional $10,400 from procedures such as fillings, root canals, extractions, and crowns and veneers, based on her expected procedure mix and pricing.

• Growth and annual projections: Starting with her Month 1 baseline, she projected 6% month-over-month growth during Year 1, slowing to 3% in Year 2. That resulted in projected annual production of about $607,000 in Year 1 and $999,000 in Year 2.

• Collections: What a practice produces is not what it collects from insurance. Your projected collection rate should account for realistic insurance write-offs, using industry benchmarks or guidance from an experienced dental adviser. Using a 95% collection rate, this dentist projected net collections of about $577,000 in Year 1 and $756,000 in Year 2.

2. How will you attract patients?

Your revenue projections are only as good as your ability to bring patients through the door. Unless you're relocating with an existing patient base that can legally follow you, you need a concrete plan for attracting patients from Day 1. The same borrower had this mapped out before she opened:

• Marketing plan: She planned to start marketing at least one month before opening and identified the specific channels she would use to attract patients, including direct mail, website and SEO, local advertising, community outreach, specialist referral relationships and a dental marketing firm.

• Introductory offer: She planned to offer free whitening with an initial exam to help drive patient volume early and build the cash flow the practice would need during its ramp-up.

• Insurance strategy: The practice planned to accept all major insurance plans initially to drive patient traffic.

3. How will you cover costs?

Your expense projections need the same level of detail as your revenue projections. A lender will want to see that your staffing and other operating costs are based on a realistic plan, not rough estimates.  Your overhead should scale with your patient volume — not ahead of it. If your expenses grow faster than your revenue, you risk becoming undercapitalized and running out of cash before you've built a sustainable patient base.

• Staffing: Staffing was projected by phase, beginning with one assistant and one receptionist in months 1-6, adding a treatment coordinator in months 7-12, and then adding a second assistant and hygienist in months 13-24, with additional hygiene support in Year 3. A phased staffing plan keeps payroll aligned with growth rather than taking on the cost of a full team from Day 1.

• Other expenses: Her rent, continuing education and marketing costs were backed by actual vendor quotes. For major expenses, concrete numbers are much more credible to a lender than rough estimates.

4. How will you support yourself?

A new practice may take time to generate enough income to support you financially. Your loan should include enough working capital to cover the practice’s expenses while it ramps up, but that money isn’t intended to fund your personal living expenses. A lender will want to see a clear plan for how you’ll support yourself during this period without draining cash from the practice. That may include continuing to work as an associate or having a spouse cover household expenses.

• Associate income: She planned to continue working as an associate while she was ramping up her practice. Her plan identified the specific days and locations where she would continue working as an associate, showing how that work would fit alongside the schedule for her new practice. She projected associate income of $42,000 during Year 1, with that income decreasing as her startup practice grew.

• Household support: Her spouse provided written confirmation that he would cover household living expenses and debt obligations during the startup phase.

Startups are inherently risky, which is why it matters to find a bank that understands dental practices and is willing to advise you on whether your assumptions are realistic and help you build a plan that can actually work. True dental lending experts like Panacea bring not only deep expertise but also real-world performance data accumulated across thousands of dental practice transactions. We can use that data to benchmark your assumptions, identify where your projections may be too aggressive or too conservative, and help you build a plan — and financing structure — that provides the capital and liquidity your practice needs to reach sustainable cash flow.

In the end, your goal isn't to predict the future perfectly. It's to show where your numbers come from and why they're realistic. This borrower did that so thoroughly that her loan was approved the same day it reached our credit team. A well-supported plan gives your lender the information needed not only to evaluate your loan but also to structure financing around what your practice will actually need.

Ready to build your startup plan?

Download Panacea’s dental practice startup planning template to help you build the projections and assumptions lenders will want to see.

Dr. Jerkins is the president and co-founder of Panacea Financial and a practicing physician in Little Rock, Arkansas. Panacea Financial is endorsed by ADA Member Advantage as the exclusive provider of practice financing. It is a division of Primis Bank and insured by the Federal Deposit Insurance Corporation.