Finance considerations of starting a practice – from scratch or buy-in

financing new dental practice

This article is sponsored content brought to you by Avant.

For many dentists, owning a practice is a rite of passage. It’s also a big financial commitment, but Avant’s experienced team of finance specialists can help provide funding solutions.

Jeremy Stagg, Head of Avant Finance SA and WA, has extensive experience meeting the funding needs of dentists.

He acknowledges, “Not everyone aspires to own a practice. But for many dentists, it is a goal that ticks a lot of boxes – from achieving a career milestone through to driving personal wealth.”

A dentist’s own skills provide the equity needed

The choice of whether to start a practice or transition from being an associate to a partner in an established practice is a very personal one.

The common thread is that dentists can usually borrow up to 100% of the funds* needed to achieve their goal.

Jeremy explains, “When it comes to buying a home, lenders want the borrower to provide equity in the form of a deposit or other collateral.”

“The situation is very different when a dentist requires funding to buy into a practice or start one from scratch.”

“In this instance, the equity that lenders look for comes in the shape of the extraordinary investment dentists make in their own intellectual property. It’s the depth of their professional skills that allows dentists to borrow up to 100% of practice finance needs*.”

Jeremy adds that dentists don’t need to offer their family home as security for practice funding. “This is a valuable plus as it allows dentists to maintain that distinction between personal and professional finances,” he notes.

Different ways of financing a practice

The financing options best suited to a dentist’s goals will depend on whether they buy into a practice or start a new practice.

Buying into an existing practice

Dentists who buy into a practice are paying for a share of the goodwill already built into the practice.

“In this case, we would suggest a practice goodwill loan,” says Jeremy.

The value of the goodwill itself will depend on several variables including how long the practice has been operating, the lease term, and whether an outgoing partner is exiting or remaining in the business.

Jeremy notes, “The Avant Finance team will work closely with a dentist’s accountant and legal adviser, to assess the value of goodwill, and ensure an optimum outcome.”

Growing a practice from scratch

Starting a dental practice from scratch calls for a different type of finance, often with a blend of loans that address different funding needs.

As a guide, finance is typically required for:

  •  the cost of fitting out the premises,
  •  purchasing practice equipment, and 
  •  providing working capital, often through a line of credit facility, as it can take time for the practice to generate significant revenue.

“It may sound complex,” says Jeremy, “But this is where Avant Finance adds value.”

“We invest time discussing each dentist’s financing needs, which allows us to identify suitable options from our own range of practice finance products plus those of our lender partners.” 

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*Eligibility criteria, terms and conditions, fees and charges apply. Contact us for further details.

IMPORTANT: The information in this article does not constitute legal, tax or other professional advice and should not be relied upon as such. Persons implementing any recommendations contained in this article must exercise their own independent skill or judgment or seek appropriate professional advice relevant to their own particular circumstances. Information is only current at the date initially published.

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