Can You Get an SBA 7(A) Loan for a Dental Office?

A study by the American Dental Association, known as the ADA, concluded that a dental practice will need around $500,000 to open. However, if you don’t have that much money lying around then you can apply for a loan from the Small Business Administration (SBA) which is run by the government.

The SBA has numerous loan programs available depending on what you are wanting the money for so it’s important to do your research thoroughly so you know how much you want to borrow and where specifically the money will come from.

In this guide, we’ll be taking you through the various types of SBA loans you can consider as well as what the minimum requirements are if you are wanting to apply for a loan for your dental practice. 

SBA Loan Programs to Consider

Before even thinking about the minimum requirements that go with each loan, it’s important to learn about the different loan programs that SBA has to offer and which ones are the best for dental practices specifically.

Here, we’ve gathered everything you need to know about the most popular loan programs that dental practice applicants wish to borrow from:

  • SBA 7(a) loan program

The most popular loan program that the SBA has is their 7(a) loan which is great for paying the major expenses for your startup office.

The most versatile option, this loan can be used to cover commercial real estate expenses as well as purchasing equipment or used as working capital to promote revolving funds so you can afford to operate throughout your first year.

The maximum loan amount that can be borrowed on the SBA 7(a) loan program is $2 million with the SBA guaranteeing around 75% of the total amount.

  • SBA 504 and CDC loan programs

The second option is for those who want a long term loan and there are two loan programs that should be considered.

These are the SBA 504 loan and the Certified Development Company (known as CDC) loan which has been designed for long term borrowing and has a fixed rate. This is the best option for those needing to make big business investments such as commercial real estate and machinery. 

Naturally, when opening a dental practice, you’ll need to purchase plenty of medical grade equipment which can be extremely costly. Equally, you can also apply for this loan program if you need to renovate your current office as well.

As these are larger loans, there is a maximum borrowing amount of $5.5 million with the SBA guaranteeing around 40% of the loan and the lender providing the rest. The total maturity period of these loans is between 10 to 20 years.

  • SBA Microloan program

The final option that is popular among dental practice applicants is the SBA Microloan program which is designed for smaller businesses who want to borrow a smaller amount.

This is perfect if you need to buy a specific piece of equipment or are looking for a couple months of rent. Whatever your plans and projections are, the Microloan program is fantastic for the everyday expense that goes into running the business. The average loan amount is around $13,000 but you can borrow a maximum amount of $350,000.

SBA Loan Program Minimum Requirements

Now that you know which loan programs are the best for dental practices to apply for, it’s essential to know what the minimum requirements are so you can better your chances of being approved for a loan.

However, bear in mind that requirements can differ depending on the lender with some lenders being more lenient than others in their screening process. This is because there are thousands of SBA applicants made each year so lenders have to ensure that they are choosing the best of the best.

Here are some requirements that you should aim to achieve before filling in your application:

  • Location

Firstly, you need to ensure that your dental practice is located in the US or planning to be opened within the US.

  • Small Business

You need to make sure that your total revenue intake meets the qualification of falling under the small business category meaning that it has a profit of $750,000 or less per year.

  • Registration

When registering your practice, make sure that you have listed your business down as “for profit” on the business register.

  • Longevity

If you are applying for an additional loan, you must ensure that your practice has been open for a long period of time as well as ensuring that it is bringing in a regular and healthy amount of revenue.

  • Credit Score

Make sure that your personal credit score has a minimum of 690 to be in with a better chance of being approved. The higher your credit score, the better your chances.

  • Profit

Ensure that you have plenty of documentation including financial statements that can show that you have plenty of profitable projections to ensure that you are capable of bringing in a reliable amount of revenue.

  • Self funding

If you have put your own money into the business then be sure to demonstrate this in your application as it will look favorable that you are willing to put your money and time on the line to ensure that you can run a successful business.

  • Debt service ratio

Including your debt service ratio will demonstrate to the lenders that you are capable of fulfilling your financial obligations.

  • Documentation

Gather as much information and documentation as you can relating to your business as this will help to paint a larger picture of your business and provide more accurate projections when you are calculating how much you wish to borrow. It will also show the lender how dedicated, prepared and organized in your business handling. 

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