Should You Choose a National or a Local Bank?

Ready to buy a dental practice? You’ll need to compare loan options. Usually, a national bank is better than a local one. We’ll explain why.

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Are You Buying a Dental Practice?

The right financing strategy and execution will help your acquisition go through smoothly. The topic of this article is local vs national financing; we cover a lot of other key topics elsewhere on this site. If it’s all a bit overwhelming, we’re happy to jump on a call and talk you through the intricacies of funding a practice purchase—or any other topic related to practice acquisition. 

Contact us today if you need guidance from someone who knows the ropes. We can guide you through the intricacies of valuation, financing, negotiations, and all the rest.

See our 27-point checklist to dental practice acquisition; it makes a great framework!

Buying a practice is a big decision

Brian Hanks helps dentists through the entire process of buying a dental practice, from due diligence through closing.

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Go With National Banks

I’m as big a fan of supporting the local economy as the next American. And you can—but not for your dental practice loan. After you’ve secured the loan and own the practice, feel free to bank at your local bank or credit union. 

The Banker Matters More than the Bank

Make sure you talk to a good banker. In fact, put more effort into this than into choosing an individual bank (Bank of America vs Wells Fargo, for example). The individual banker at whatever bank you’re talking to can be more impactful to your rate and terms than the bank itself, assuming you’re dealing with a bank that offers good dental practice loans (more on which banks offer these below).

Put differently, it’s more important to know the right name to call than the right bank. It’s about the law of large numbers. The bigger banks doing dental lending have upwards of 80+ bankers spread around the country all doing dental loans like yours. Inevitably, one or two of those bankers are the best and one or two are the worst of the bunch.

You want to call the best banker and not the one about to be fired. And most banks dictate that the banker you talk with first is the one you work with on your loan, not necessarily the banker assigned to your territory. A buyer’s coach like me can make sure you call one of the good ones first.

The best bankers will have the most experience, have the best internal teams, have the right relationships with the underwriters to tee up your deal internally, and the right relationships with management to ask for exceptions to their “standard” deals to be able to secure the very best rates and terms.

Pros of a National Bank

  • Offer standardized business loans available nationwide
  • Can provide large loan amounts
  • Have programs to facilitate SBA loans and other government-backed financing options
  • Some have specialized dental lending programs
  • Business savings and business checking accounts are available at all locations
  • Large national ATM networks provide fee-free cash access options across the country
  • More sophisticated treasury management and loan management services
  • National infrastructure allows for mobile banking and online banking
  • Personal banking, personal checking, and personal credit card services are available nationwide
  • Can have dedicated dental lending divisions with expertise in financing practice acquisitions

Which Banks Offer the Best Dental Practice Loans?

The best bank for one practice acquisition may not be best for another. It all depends on the amount borrowed, your credit score, the current interest rate, and a lot of other factors. That said, here are the banks that our clients most frequently get good loans from:

  • Live Oak: a leading dental lender offering acquisition loans, equipment financing and working capital.
  • Bank of America: endorsed by dental associations for practice purchase loans.
  • Wells Fargo: strong dental lending experience and competitive rates.
  • BMO Harris: ADA partner offering preferred dental practice loans.

Do your own research, and, like we said, get in with a really good banker.

But What About Local Banks?

Local banks, with rare exceptions, aren’t the best for dental acquisitions. 

On occasion, as in maybe 1 deal in 20, I’ll see a local bank competing against the big national bank win the deal. When I talk with the banker at the local bank, they typically say some version of, “We just couldn’t lose another deal to BofA, so we took a loss on this one in hopes that other dentists hear about it.”

Do You Need Help Choosing a Bank for Your Dental Transition?

We’ve helped numerous clients like you not only navigate banking decisions but also various other aspects of dental practice acquisition. From comprehensive financial analysis to practice appraisal, we’ve got your back.

Need assistance with purchase term negotiations or someone to help you handle the dental practice acquisitions and transitions delicately? You can count on us.

Let’s chat about your needs and create a strategy that ensures a seamless and successful transition. Your journey to owning a thriving dental practice doesn’t have to be stressful—we’re here to make it smooth and rewarding.

What to Do Before You Get a Loan

Here are some key steps on the path to dental acquisition funding:

  1. Evaluate your financial health, including credit score, assets, and liabilities.
  2. Craft a compelling business plan that outlines your goals, projections, and repayment strategy.
  3. Collect essential documents like tax returns, financial statements, and practice details.
  4. Research lenders to find one aligned with your needs.
  5. Identify valuable assets to secure the loan, which bolsters your application.
  6. Reduce existing debts to improve your financial profile and loan eligibility.
  7. Address any credit issues and work towards an impressive credit history.
  8. Seek advice from dental-specific financial experts (such as Dental Buyer Advocates) for tailored insights.
  9. Set aside a substantial down payment to strengthen your loan application.
  10. Connect with lenders early to establish rapport and understanding.
  11. Ensure all paperwork is organized and ready for submission.
  12. Be ready to answer queries about your practice, experience, and repayment ability.
  13. Thoroughly comprehend loan terms, interest rates, and repayment schedules.
  14. Conduct a practice valuation to determine its worth and make informed financial decisions.
  15. Apply for pre-approval to gain clarity on your borrowing capacity.
  16. Present yourself professionally, as lenders evaluate your credibility.
  17. Develop a post-loan budget that accommodates repayments and operational costs.
  18. Address potential red flags and provide solutions in your application.
  19. Showcase your vision for practice growth, emphasizing its potential success.
  20. Be ready to negotiate terms, especially interest rates and loan structure.

Questions to Ask a Banker

When you meet with potential lenders, come armed with smart questions. This helps you evaluate if they understand your dental practice and can meet your financing needs. Here are some important questions to get the conversation going:

  • What types of dental practice loans do you offer? Are there different options in terms of amount, repayment timeline, and interest rates?
  • How long have you been providing financing to dentists? Do you have experience with loans specifically for practice acquisitions?
  • What is the process and timeline for loan application and approval? When can I expect a decision?
  • What credit criteria and financial ratios does your bank use to assess loan applications?
  • What down payment amount or collateral do you require for a dental practice acquisition loan?
  • Do you offer fixed or variable interest rates? How do you determine the rates?
  • Are there any upfront or recurring fees associated with the loan?
  • How long can the interest rate be locked in? Is there a charge for this?
  • What flexible options exist for repaying the loan if cash flow becomes tight?
  • What support does your bank provide after the loan is funded?
  • What happens if I need to sell the practice? Can the loan be transferred?

Don’t hesitate to ask plenty of questions now—it helps prevent surprises later on. And it also helps you figure out if you’re talking to an A-level banker, or a dud.

Let Us Be Your Dental Practice Acquisition Quarterback

The ability to purchase a dental practice is a wonderful milestone, but the acquisition process can easily overwhelm you. Leave the stress to the professionals—contact our team for a free consultation today!

With decades of combined experience, we quarterback the entire purchase process so you can invest in a successful dental business with confidence. Our proven process enables smooth acquisitions on the best possible terms.

Our full-service guidance empowers you to realize your vision of practice ownership. We negotiate on your behalf, so you can focus on delivering excellent patient care and growing your new practice from day one.

Choose your bank wisely and fulfill your entrepreneurial dream with Dental Buyer Advocates. Let us guide you on the fast track to acquiring your own successful dental practice.

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FAQ on Dental Practice Financing

What is the default rate for dentists?

A default rate is the percentage of loans or credit obligations that have not been repaid by borrowers as agreed, which leads to a situation where the borrower is in default. The default rate for dentists is relatively low, with the majority maintaining strong financial stability.

What is the average profit margin for a dentist?

The average profit margin for dentists can be quite high. Dentists often achieve a healthy average profit margin due to consistent cash flow, particularly in specialized fields like oral and maxillofacial surgery.

What is the maximum default rate for dentists?

The maximum default rate for dentists is a crucial benchmark that dental practitioners aim to keep well below industry averages. A low default rate ensures the financial stability of a dental practice.

With a default rate significantly lower than industry norms, dental practitioners can establish a solid foundation for their practice’s financial health. This prudent approach helps mitigate potential risks and ensures that the practice remains resilient even in challenging economic circumstances.

What is a good EBITDA for a dental practice?

Earnings before interest, taxes, depreciation, and amortization (EBITDA) is a financial metric used to assess the profitability and operating performance of a business. A good EBITDA for a dental practice varies, but generally falls between 15-25%, which reflects a healthy financial performance.

Will my student loan from dental school affect my ability to get a dental loan?

Your student loan from dental school can influence your ability to get a dental loan. Lenders assess your debt-to-income ratio to evaluate your creditworthiness, so a large student loan could hinder your chances of getting a dental loan.

What is a home equity line of credit?

A home equity line of credit (HELOC) is a loan option that lets homeowners borrow against the equity in their property, providing a flexible source of funds for various purposes, including dental practice acquisition.


Listen to this podcast to understand how to get the best rates and terms from banks.

Where are you Stuck?

Whether you’re trying to find a practice or have already closed on one, we provide expert guidance for every aspect of the deal. Click any of the links below to learn more.

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