Unlocking Growth: Commercial Finance for Dentists
Dental Practice Finance in Australia: A Practical Guide for Dentists
Buying, establishing or expanding a dental practice involves more than choosing a loan with a competitive rate.
A practice acquisition may include goodwill, equipment and working capital. A new clinic can involve fit-out payments, dental chairs, imaging systems, sterilisation facilities, software and months of operating expenses before patient revenue reaches its expected level. Purchasing the premises introduces a separate commercial-property decision.
Because these costs behave differently, placing everything into one loan is not always the most suitable approach. The objective is to build a finance structure that supports the transaction while leaving the practice with enough cash to operate and grow.
This guide explains the main dental-practice finance options, what lenders may examine and the questions dentists should ask before applying.
Financing the purchase of a dental practice
A dental-practice acquisition commonly includes two very different asset categories:
Tangible assets such as dental chairs, imaging equipment, cabinetry, computers and instruments.
Intangible value such as patient relationships, systems, location, brand and expected future earnings, usually described as goodwill.
Some lenders experienced in dental finance may consider lending against practice goodwill. Their assessment is generally based on the practice’s capacity to produce maintainable cash flow rather than the resale value of physical equipment alone.
Information that may influence the assessment includes:
Revenue and profitability trends.
Revenue generated by the selling dentist compared with associates.
The number and stability of clinicians.
Recalls, hygiene activity and patient retention indicators.
Treatment and revenue concentration.
Staff and associate arrangements.
The remaining term and options in the premises lease.
Equipment condition and upcoming replacement expenditure.
The vendor’s proposed transition period.
The buyer’s clinical and management experience.
Existing personal and business financial commitments.
A lender’s assessment is not a substitute for commercial due diligence. Before committing to a purchase, dentists should consider engaging an accountant and solicitor experienced in healthcare-practice transactions, a specilaist broker will also help you translate to maximise your lender position.
Look beyond the advertised purchase price
The practice price is rarely the entire funding requirement. Depending on the transaction, additional costs may include:
Legal and accounting due diligence.
Practice, property or equipment valuations.
Government charges and duties.
Loan establishment and documentation costs.
Lease assignment or landlord costs.
Repairs or equipment replacement.
Software and patient-record migration.
Initial consumables and laboratory expenses.
Recruitment, wages and training.
Marketing and rebranding.
Working capital for the transition period.
This distinction is particularly important when considering “100% finance”.
Some lenders may offer eligible dentists funding of up to 100% of a purchase price or asset value for particular purposes. That does not necessarily mean every transaction cost will be covered. Approval can depend on serviceability, valuation, credit history, professional experience, security, loan purpose and lender policy.
For example, if a practice costs $1.2 million but the complete project requires another $100,000 for advice, technology changes and working capital, a facility covering the purchase price alone would still leave a funding gap.
High-percentage lending can preserve cash, but it also produces higher debt and repayments. The structure should be tested against slower revenue, higher expenses and unexpected capital expenditure, not only the best-case forecast.
Financing a new dental practice and fit-out
A new practice has a different risk profile from an established clinic because there may be no historical practice revenue for a lender to examine.
A lender may instead consider the dentist’s existing income, experience, business plan, location, proposed services, projected patient volumes and personal financial position.
A dental fit-out budget might include:
Design, project management and approvals.
Plumbing, electrical and data work.
Dental suction and compressed-air systems.
Sterilisation areas and cabinetry.
Radiation shielding and imaging installation.
Dental chairs and delivery systems.
Compressors, autoclaves and instrument-cleaning equipment.
Practice-management software, computers and communications.
Reception, signage and patient amenities.
Initial stock, consumables and laboratory costs.
It is sensible to include a contingency for construction variations and delayed opening. Dentists should also confirm when deposits and progress payments fall due, as the timing may not match the lender’s drawdown process.
Signing a lease, placing a non-refundable equipment order or beginning construction before finance conditions have been reviewed can create avoidable risk.
Dental equipment finance
Dental equipment is often financed separately because it has an identifiable cost and useful life.
Depending on the asset, ownership requirements and tax advice, possible structures may include an equipment loan, chattel mortgage or lease. Relevant considerations include:
The deposit and amount financed.
Fixed or variable pricing.
Repayment term.
Any residual or balloon payment.
Early-repayment costs.
Whether installation, software and training can be included.
Whether the equipment becomes security for other facilities.
The expected working life and replacement cycle.
The effect of repayments on practice cash flow.
A longer term may reduce monthly repayments but increase the total financing cost. Conversely, repaying equipment too quickly can place unnecessary pressure on a new practice. Ideally, the loan term should have a sensible relationship to the asset’s productive life.
Tax and accounting treatment varies between structures, so these issues should be confirmed with the practice accountant.
Financing dental premises
Buying practice premises can provide greater control over occupancy costs and future renovations, but it is a separate investment decision from purchasing the practice itself.
A commercial-property lender may examine:
The property valuation and proposed use.
Loan-to-value ratio.
Practice cash flow and rent affordability.
Location and alternative use of the property.
Lease arrangements between the property owner and practice.
Borrower and guarantor financial positions.
Environmental, planning or building issues.
The remaining debt attached to the practice.
Dentists should consider how the property loan, practice loan and personal lending interact. Cross-securing several facilities may sometimes assist an application, but it can also reduce flexibility when refinancing or selling an asset.
The rate is therefore only one part of the comparison. Security, guarantees, covenants, repayment flexibility, fees and the ability to release an asset later can be equally important.
Learn more about commercial loans for medical and dental professionals
Can an SMSF purchase dental-practice premises?
An SMSF may be able to acquire eligible business real property and lease it to a related dental practice, provided the arrangement complies with superannuation law and is conducted on appropriate terms.
Where borrowing is involved, a limited recourse borrowing arrangement may be required. These arrangements have strict requirements concerning ownership, documentation and the asset being acquired. SMSFs are generally prohibited from borrowing except in limited circumstances, as explained by the Australian Taxation Office
The structure should be reviewed by appropriately licensed financial, tax and legal advisers before signing a contract. Incorrect sequencing can be difficult or expensive to repair.
How lenders assess a dental-practice application
Although requirements vary, an application may involve four areas.
1. The dentist
The lender may review professional registration, clinical experience, employment or contracting history, personal income, credit conduct, assets, liabilities and ongoing commitments.
2. The practice
For an established practice, the lender may examine financial statements, tax returns, current management accounts, business bank statements and historical revenue.
Reported profit may need to be adjusted for owner remuneration, personal expenses, unusual costs and one-off items to estimate maintainable earnings. These adjustments need to be supported rather than assumed.
3. The transaction
The lender may require a sale contract, price breakdown, lease, valuation, equipment list, vendor transition plan and evidence of the purchaser’s contribution.
For a new practice, it may request a business plan, budget, quotes, construction timetable and cash-flow forecast.
4. Repayment capacity and risk
The lender will consider whether the proposed debt can be serviced after allowing for operating expenses, tax, existing commitments and an appropriate buffer. Security and guarantees may also affect the available structure.
Dental-practice finance document checklist
Preparing a complete information pack can reduce delays. The lender or broker may request:
Personal identification and statement of assets and liabilities.
Evidence of professional registration and employment or contracting income.
Personal and business tax returns.
Practice financial statements.
Current profit-and-loss statement and balance sheet.
BAS and business bank statements.
Existing loan and credit-card statements.
Purchase contract or heads of agreement.
Premises lease and options.
Equipment list, quotes and supplier invoices.
Business plan and cash-flow forecast.
Entity, company and trust documents.
Details of the vendor transition.
Valuation reports where required.
The exact list will depend on the transaction and lender.
Questions to ask before accepting a finance offer
Comparing only the advertised interest rate can overlook important differences. Ask:
What is the total amount being funded, and what must I contribute?
Are the purchase price, equipment, fit-out and working capital funded separately?
Which assets and guarantees secure each facility?
Is the rate fixed or variable, and how can it change?
Are there establishment, valuation, line or early-repayment fees?
Is there a balloon or residual payment?
Can extra repayments be made?
What financial reporting or loan covenants apply?
Can individual securities be released later?
What happens if settlement or construction is delayed?
How do repayments perform under a downside cash-flow forecast?
Does the structure restrict a future partner buy-in, expansion or property purchase?
These questions help reveal whether a facility fits the practice’s longer-term plans, not simply whether it can complete the immediate transaction.
A practical dental-finance process
A well-managed application generally follows these stages:
Define the complete project. Include the purchase, fit-out, equipment, advice, fees and working-capital requirements.
Build the adviser team. Engage the accountant, solicitor and finance specialist before signing an unconditional agreement.
Prepare the evidence. Assemble financial information, forecasts, quotes and transaction documents.
Compare suitable structures. Consider total cost, cash contribution, security, repayment flexibility and lender conditions.
Complete credit assessment and valuations. Respond promptly to information requests and verify all approval conditions.
Review formal documents. Have the relevant legal and financial advisers review the structure before settlement.
Protect post-settlement liquidity. Ensure the practice retains a realistic buffer for operating and unexpected costs.
Frequently asked questions
Can dentists borrow 100% for a practice purchase?
Some eligible dentists may be able to obtain finance for up to 100% of the purchase price or value for certain transactions. It is not automatic, and additional costs may remain unfunded. Eligibility is subject to lender policy, serviceability, valuation, credit assessment and the proposed structure.
Can a lender finance dental-practice goodwill?
Potentially. Specialist lenders may consider the maintainable earnings and commercial value of an established practice rather than relying only on physical assets. The practice financials, purchase price, buyer experience and transaction structure will be important.
How much deposit does a dentist need?
There is no universal deposit requirement. It depends on the purpose, lender, valuation, borrower profile, security and amount requested. Dentists should calculate their contribution against the complete project cost rather than the headline purchase price alone.
Should equipment and goodwill be placed in the same loan?
Not necessarily. Equipment, goodwill, working capital and property have different useful lives and risk characteristics. Separating them can provide clearer repayment terms and greater flexibility, although it may also introduce additional facilities and fees.
When should I arrange finance?
Begin before signing an unconditional purchase contract, lease or major equipment order. Early review can identify funding gaps, lender conditions and information requirements while there is still time to change the transaction.
Speak with a dental finance specialist
The right time to review finance is before a purchase or expansion becomes urgent.
MedX Finance works with dentists, their accountants, solicitors, equipment suppliers and a panel of bank and non-bank lenders to assess suitable funding options for practice acquisitions, fit-outs, equipment, working capital and commercial property.
Speak with a MedX Finance dental finance specialist.
Important information: This article contains general information only and does not constitute financial, legal, tax or investment advice. Finance is subject to lender approval, eligibility criteria, valuation and applicable terms and conditions. Obtain advice appropriate to your circumstances before entering a transaction.