Dental SBA Loan FAQ

Yes. SBA loans are one of the most common financing methods for dental practice acquisitions. Both SBA 7(a) and SBA 504 programs can be used. You'll need relevant dental experience, an equity injection of at least 10% of total project cost, acceptable credit (680+ is a common lender preference), and practice cash flow that covers the new debt payments at least 1.25 times on the seller's historical results, the SBA floor on a purchase under SOP 50 10 8.1.

The SBA minimum equity injection is 10% of total project cost, and when you are buying a practice as a new owner (an Initial Acquisition under SOP 50 10 8.1) it can't be waived. Lenders may ask for more. Seller notes can count toward equity if they are on full standby (no principal or interest payments for the term of the 7(a) loan), but full-standby seller debt and minority (under 20%) investor equity together can cover no more than half the required injection.

Student debt is included in your global cash flow test, which must clear 1:1 under SOP 50 10 8.1. Lenders add your monthly student loan payments to your total personal and business debt obligations. It is not part of the separate 1.25x business coverage test on a purchase, which looks only at the practice and its debt. With average dental school debt around $300,000, this can significantly impact borrowing power. Income-driven repayment plans can help by lowering monthly obligations.

Most SBA lenders require a minimum credit score of 680 for dental practice loans. Some will consider 650+ with compensating factors like strong practice cash flow, higher equity injection, or significant management experience.

On a business purchase (an Initial Acquisition, the default for a first-time buyer), SOP 50 10 8.1 sets a 1.25:1 debt service coverage floor, measured on the seller's last full fiscal year or the average of the last two. Projections can't be used to meet it. That test compares the practice's cash flow to the business debt payments. Student loans and other personal debts go into a separate global test, which must clear 1:1. Startups (not purchases) are underwritten at 1.15x, or 1.10x on a 7(a) Small loan of $350,000 or less, and may use projections. Lenders can set higher internal minimums.

SBA 7(a) is the most common choice for dental practice acquisitions because it covers the business purchase, equipment, and working capital in one loan. SBA 504 is ideal when you're also buying the building. Many expansion deals combine both programs.

Yes. SBA 7(a) can finance de novo (startup) dental practices. You'll need strong projections, a detailed business plan, a signed lease, and relevant clinical experience. Expect 10% equity injection. The lack of historical financials makes these loans more challenging but not impossible.

Yes. Many dentists transition from DSO employment to independent ownership using SBA financing. Key factors include your non-compete agreement (geographic and time restrictions), ability to demonstrate business management skills, and a solid business plan showing your readiness for ownership.

Expect 60-90 days from application to funding for SBA 7(a). SBA 504 loans take 90-120 days due to CDC involvement. Start insurance credentialing 90-120 days before your target closing date to avoid billing gaps.

SBA 7(a) loans go up to $5 million. SBA 504 CDC portions can reach $5.5 million. Most dental practice acquisitions fall between $400,000 and $2 million. Multi-location or practice-plus-building deals may be larger.

Lenders use income, market, and asset-based approaches. The key challenge is that 60-80% of a dental practice's value is goodwill (patient relationships, reputation), which has limited liquidation value. Lenders focus on collections, EBITDA, active patient count, and provider retention.

Yes. Seller standby notes can count toward your 10% equity injection if the note is on full standby (no principal or interest payments for the term of the 7(a) loan) and is subordinate to the SBA loan. Full-standby seller debt and minority investor equity together can cover no more than half the required injection. This is common in dental practice transactions.

You must get credentialed with insurance panels before billing under your own provider number. Start 90-120 days before closing. Many deals include a transition period where the seller stays on to maintain billing continuity until your credentialing is complete.

Yes. Dental equipment (chairs, imaging systems, CAD/CAM, sterilization equipment) can be included in your SBA 7(a) loan for acquisitions or startups. Equipment-only purchases may qualify for SBA Express loans (up to $500,000) with faster processing.

The practice and its assets serve as primary collateral. However, dental practices are goodwill-heavy (60-80% intangible), creating a collateral shortfall. Lenders must take available collateral (on an acquisition that includes a lien on accounts receivable and inventory, and, if the loan is not fully secured, available equity in personal real estate of 20%+ owners) but cannot decline solely for insufficient collateral. Personal guarantees from 20%+ owners are required.

Yes. Use SBA 504 for the building (fixed rates on the CDC portion) and SBA 7(a) for the practice acquisition, equipment, and working capital. The 504 has to be its own loan, since 504 can't be blended into a single 7(a), and the 7(a) piece for the practice amortizes over no more than 10 years. This dual-program structure is common for established dentists.

Lenders want to see clinical experience and some evidence of business acumen. For acquisitions, your dental experience is usually sufficient. For startups, lenders look for evidence you can manage a business, running a department, managing staff, or business coursework.

The lender will attempt to recover from practice assets, any real estate collateral, and personal guarantees from 20%+ owners. The SBA guarantee protects the lender, not the borrower. Default will damage your personal credit and finances.