Let’s do a little paint-by-numbers here, stick with me. You buy a practice for $1M, and banks are competing to give you a loan. Bank 1 quotes an interest rate of 5%, while Bank 2 is offering 5.5%. Which bank do you choose?
Duh! Bank 1, right? That’s a savings of $3,155 annually. Easy peasy.
Not so fast. All things being equal, yes, that’s the better deal. But all things are never equal. In this scenario, while Bank 1 got you all excited about their much lower interest rate, what they failed to highlight was the provision in the loan that required that you use their “merchant services,” and those rates will end up costing you way more than what you saved in loan interest.
Confused yet? No worries! In fact, that’s kind of the point I’m trying to make here. Let me explain.
Merchant services refer to the systems and providers that enable your dental practice to accept and process patient payments. This includes credit and debit card processing, contactless payments, online bill pay, recurring payments, and patient financing options. While these services often operate quietly in the background, they play a significant role in your practice’s financial health.
The impact on your bottom line starts with processing fees. Rates and pricing structures vary widely, and small differences can add up quickly across hundreds or thousands of transactions each month. Practices using outdated or non-transparent pricing may be overpaying without realizing it. Because of this, I strongly recommend reviewing your pricing every year. Think of your home & auto insurance. I’m certain everyone at one point or another has gone years without looking at their pricing and realized they could have been saving money. Merchant services is very similar.
Pricing can be confusing at first with lots of different structures. Ask your rep to equate their pricing to what it is “all in” on a monthly basis. If your dental practice does $1,000,000 in revenues and is 60% FFS and 40% insurance you could be paying over $20,000 annually for credit card processing easily. To put some perspective on this the savings difference between a 5% and 5.5% on a $1,000,000 loan on a 15 year term is only $3,155 annually.
Choosing a merchant services provider with competitive rates and clear terms can immediately reduce unnecessary expenses. Beyond fees, merchant services affect cash flow and efficiency. Faster funding means you receive payments sooner, improving liquidity. Integrated payment systems that connect with practice management software reduce manual entry, minimize errors, and save staff time at the front desk.
Pay attention to your loan rate. But don’t let it distract you from other loan terms that can have a huge impact.
