Buying a dental practice is one of the most exciting—and expensive—moves you’ll make in your career. Many first-time buyers are laser-focused on one number: the purchase price. But if you’re financing the acquisition, the real cost of ownership goes far beyond that.
Below are two critical things you must understand to avoid common pitfalls when financing a $1,000,000 dental practice.
1. Understand the Long-Term Cost of Your Loan
When you finance a $1,000,000 dental practice, banks typically offer 100% financing over 10 to 15 years. But while longer loan terms mean lower monthly payments (which helps with cash flow), they come at a cost—more interest paid over the life of the loan.
Let’s break it down:
| Loan Term | Interest Rate | Monthly Payment | Total Payment |
| 10 years | 7.0% | $11,610 | $1,393,203 |
| 15 years | 7.0% | $8,988 | $1,617,880 |
That’s a difference of $224,000 in interest just for choosing a longer loan.
So what’s the move?
- If you’re early in your career or have heavy student debt, a longer loan term might make the monthly payments manageable.
- But unless you have a clear plan to invest the extra monthly cash flow back into the business (and earn a return higher than your loan rate), that “savings” is just deferred cost.
Pro Tip: Each 1% increase in interest rate adds roughly $500/month in interest costs on a $1M loan.
You don’t want to be “house poor” with your practice. Make sure your loan structure fits your goals and reality.
2. Know What It Takes to Get Approved
Even though you’re the one borrowing, the underwriting is mostly on the business. Lenders want to make sure the practice cash flows well enough to cover debt payments and operating costs comfortably.
Most banks require:
A Solid Credit Profile
- Minimum FICO: 680+, but ideally 720+
- No major derogatory marks (bankruptcies, defaults, etc.)
7–10% Liquidity
- You’ll need $70,000–$100,000 in cash or liquid assets to qualify.
- This isn’t for a down payment (which is often $0); it’s to show you have reserves for working capital and emergencies.
Get Two Loan Proposals
Not all bank loans are created equal. Compare:
- Prepayment flexibility (you don’t want to be penalized for paying off early)
- Interest rates (fixed vs. variable)
- Term lengths
- Origination fees
If you can’t qualify for traditional bank financing, consider creative alternatives:
- Seller financing: The seller loans you a portion (e.g., 10–20%) while a bank covers the rest.
- SBA 7(a) loans: Easier underwriting, lower down payments, longer amortization—but slightly higher rates and fees.
Don’t Forget: You’ll Need a Working Capital Line of Credit (LOC)
A common oversight for buyers is underestimating how cash flow works in a dental practice.
Most practices have 30–45 days of Accounts Receivable (A/R), depending on payer mix. Insurance-heavy practices may extend to 60+ days.
This means:
You’re performing work today but won’t see the revenue for 1–2 months.
That creates short-term cash gaps—even in profitable practices.
A working capital LOC bridges that gap. Think of it like a business credit card with lower rates:
- Use it to cover payroll, lab bills, and supplies.
- Only pay interest on the funds you use.
- Reuse it as payments roll in.
It also:
- Preserves liquidity
- Builds your business credit profile
- Gives flexibility for growth
Final Thoughts
The biggest mistake buyers make? Only thinking about the practice price.
Understanding the true cost of your loan, preparing the liquidity required, and setting up smart financing tools like a working capital LOC will set you up for success—not stress.
Because when you’re buying a $1,000,000 dental practice, the numbers don’t stop at the closing table.