Starting a practice is a dream for many dental school graduates, but the journey can seem daunting, especially with the burden of student debt.
However, new dentists can successfully secure financing and establish their own practices with the right approach and support. While dentists have many options they can pursue, a majority still prefer owning a private practice—more than 72%, according to 2023 data from the American Dental Association's Health Policy Institute.
As a health-care banker at US Bank, I have found that these dentists enjoy leading their own operation and building long-term relationships with their patients. Owning a practice is also a successful strategy to produce income and long-term wealth that can support a dentist's family into retirement.
But before seeking financing to launch a private practice, here are three questions dentists should ask themselves.
What is your projected cash flow?
As a dentist explores launching a practice, it's always helpful to work with specialized health-care bankers. That's because they are often able to provide favorable options, such as 10-to-15-year terms on non-real estate loans. These loans come with smaller monthly payments compared to the five-to-seven-year loans offered by some other lenders. Health-care bankers can also offer money movement, back-office software, wealth management, and other services to support dentists as they build their practices.
According to 2022 data from the American Student Dental Association, the average debt of a dental student graduate was $293,900, but many can walk away with much more. This burden is alleviated by health-care bankers concentrating on the monthly cash flow of their clients rather than their total debt; they want to make sure graduates are bringing in enough revenue to cover their monthly business and personal expenses, including student loan payments. If this is the case, a health-care banker may be able to provide 100% financing.
As they consider a loan for a practice, bankers will look at a borrower's monthly expenses and income. While college debt is a sizable expense, income-driven repayment (IDR) plans offered by the US Department of Education can help make monthly payments more manageable. Under such plans, payments are tied to ability to pay—rather than the total balance—to reduce debt payments.
As far as expected income for a private practice, the trend has been positive lately. Independent practices have been adding procedures and hours alongside increasing fee schedules. According to the Health Policy Institute, the median gross billings per dentist (for owner dentists in private practices) averaged nearly $800,000 in 2023, which is a 6% increase from the previous year.
What kind of practice are you starting?
A major decision for a dentist launching a new practice is whether to start a new one from scratch or to buy an existing one. Practitioners need to weigh the pros and cons before diving in.
A dentist starting from the ground up can open with new equipment and make business and patient treatment decisions without worrying about the precedent of the previous owner. However, a new practice means starting without an existing patient list or past revenue.
Conversely, when a dentist buys a practice, they take on existing patients and experienced staff members. But the previous dentist's treatment style may differ from the new owner's approach, and equipment likely won't be brand new.
All of these factors are important to consider before dentists set out on their own.
Who is on your team?
Dentists should not feel like they are flying solo when launching a practice. Every successful practitioner needs the support of a team of experts.
In addition to a specialized banker, dentists require the help of accountants, attorneys, and consultants with extensive experience in the health-care industry. They can help craft a business plan that maximizes efficiency and revenue so a practice will produce the necessary cash flow to secure financing.
And once the practice is off and running, these experts can be at a dentist's side every step of the way, helping provide guidance as the practice grows and evolves.
Today's dental students are graduating with significant debt, but they can still work for themselves as they seek to serve their patients and support their families' futures. With the help of a specialized banker and other experts, they should be optimistic about obtaining the financing they need to pursue their dreams.
Editor's note: This article appeared in the January 2025 print edition of Dental Economics magazine. Dentists in North America are eligible for a complimentary print subscription. Sign up here.
