Buying a dental practice is the fastest way to own a profitable business — and the easiest way to overpay for one. The brokers and law firms on page one will tell you the steps. Almost none of them will show you the math: what the practice is worth, what you put down, what the monthly payment actually is, and whether the cash flow covers it. This guide does the math, compares the four financing paths with real numbers, and covers the gap nobody talks about: the weeks between signing a letter of intent and closing an SBA loan.
How practices are valued
Percentage of collections
The doctor-to-doctor rule of thumb: a general practice sells for roughly 60–80% of one year's collections. A practice collecting $1,000,000 a year would price around $600,000–$800,000 on this method. Smaller practices tend to land below the range; larger, system-driven practices above it. Collections multiples are a starting point, not an appraisal — profitability decides where in the range you land.
EBITDA multiples
Larger buyers price on earnings, not collections. Solo practices commonly trade around 3–6x adjusted EBITDA; group practices higher; DSO buyers, who spread overhead across many locations, commonly pay higher multiples still — which is why the same practice can be "worth" two different prices to two different buyers. Adjusted EBITDA means earnings after adding back the owner's excess compensation and one-time items, then subtracting a market-rate dentist salary: it shows what the practice earns as a business, not what the owner takes home.
What buyers overpay for
Three overpayment traps recur: paying for the seller's personal production (patients who follow the seller, not the practice); paying full price for aging equipment that needs replacing in year one; and paying for a location whose lease cannot be renewed on workable terms. Price the patient base, the equipment, and the lease separately — and discount anything that walks out the door with the seller.
SBA vs. bank vs. alternative vs. seller note, with real numbers
| Path | Rate structure | Speed | Down payment | Prepayment | Best fit |
|---|---|---|---|---|---|
| SBA 7(a) | Variable, prime plus a lender spread | Commonly 60–90 days LOI to close | Typically 10% of project cost | Penalty window in early years (commonly the first 3) | Most acquisitions; finances goodwill |
| Conventional bank | Variable or fixed; often competitive | Similar to SBA or longer | Often 20% or more | Varies by loan | Strong-credit buyers with larger down payments |
| Alternative / bridge | Higher cost; shorter terms | Days to weeks | Varies; often equity-like requirements | Usually flexible | Bridge gaps, not the acquisition itself |
| Seller note | Negotiated between buyer and seller | At closing | Negotiated slice of the price | Negotiated | Gap financing; standby notes can support SBA equity |
Worked example — the monthly payment. Take a practice priced at $700,000 (70% of $1,000,000 in collections). With 10% down ($70,000), you finance $630,000. Illustrative math at a 10% annual rate over 10 years (120 monthly payments): the monthly payment is about $8,326, or about $99,900 a year. If the practice generates $180,000 a year of cash flow available for debt service after paying a market-rate dentist salary and operating costs, the debt-service coverage ratio is 1.80 ($180,000 / $99,900) — comfortable. If available cash flow were only $110,000, coverage would be 1.10 — financeable, but with no margin for a bad quarter. Run this math on the seller's real numbers before you sign anything: price, down payment, rate, term, payment, coverage.
The 100% and high-leverage play
True 100% financing is rare, but high-leverage structures are real: a 10% SBA equity injection, with part of that 10% covered by a seller note on full standby for the entire SBA loan term, can reduce your cash requirement below 10% in qualifying deals. Projection-based income can also support startup acquisitions with no existing cash flow, though lenders scrutinize those files hard. High leverage cuts both ways: it gets you in the door, and it leaves no cushion if collections dip in year one. Keep a working-capital reserve outside the loan.
How much can you afford? The DSCR test
Affordability is not the purchase price — it is the payment against cash flow. Compute it in three steps: (1) adjusted EBITDA of the practice, minus a market-rate salary for the dentistry you will perform; (2) minus your personal debt payments, including student loans; (3) divide what remains by the annual loan payment. Lenders want that ratio comfortably above 1.0; smart buyers want it above 1.25 before signing. If the ratio fails, the answer is a lower price, a larger down payment, a longer term, or a different practice — not a riskier loan.
Bridge financing between LOI and SBA close
SBA loans take 60 to 90 days, and deals have costs before close: earnest money, due diligence, legal review, appraisal, and the working-capital gap after close, when the seller's receivables are still aging and your first payroll arrives on schedule. Bridge financing — a short-term line or advance that funds those interim costs and is repaid from the SBA proceeds or early collections — is the unowned gap in this market: almost nobody writes about it, and almost every buyer needs some version of it. Arrange the bridge before you sign the LOI, not when the earnest money is due. And keep a post-close reserve: the first 90 days under new ownership are when collections dip and costs do not.
Acquisition checklist lenders want
- Seller's 3-year production and collections reports, plus trailing-12-month detail.
- Accounts-receivable aging and payer mix (fee-for-service vs. PPO).
- Patient retention data: active patient count, new patients per month, hygiene recall rate.
- Equipment list with age and condition, plus an equipment appraisal for major items.
- Lease terms: remaining term, renewal options, rent escalations, assignability.
- Covenant-not-to-compete from the seller, with reasonable radius and duration — lenders treat this as deal protection, not boilerplate.
- Transition agreement: seller availability for patient introductions, typically 30–90 days.
Who is buying: three buyer profiles
Associate buy-in. You already work in the practice and buy in stages — a minority share first, the rest later. Financing is smaller and staged too, and you already know the patients, staff, and numbers. The risk is paying a full-practice multiple for a partial share without control.
First-time buyer. You are buying cold, usually with student debt and an SBA loan. Your edge is the SBA structure; your risk is overpaying for goodwill and underestimating the working-capital gap. The DSCR test is your best friend.
DSO rollup seller or buyer. As a seller, you may get a higher multiple but with rollover equity or earnout strings. As a buyer building a group, your financing looks more like corporate debt than a single-practice SBA loan, and your valuation math runs on EBITDA from day one.
Common buyer mistakes
- Overpaying for goodwill that is really the seller's personal reputation.
- Ignoring post-close working capital — the AR gap between closing and your first full collections month.
- No transition agreement — patients who never meet the new doctor leave.
- Skipping the lease review — a great practice in a location you cannot keep is not a great practice.
- Financing the deal but not the dip — collections almost always dip during transition; budget for it.
Frequently asked questions
How much down payment do I need to buy a dental practice?
For an SBA 7(a) acquisition loan, the typical equity injection is 10% of the total project cost. On a $700,000 purchase that is $70,000 of your cash. A seller note on full standby for the entire SBA loan term can count toward that 10% in some structures, which can reduce your cash requirement — your lender will confirm whether your deal qualifies.
Can an SBA loan cover goodwill when buying a dental practice?
Yes. Goodwill — the patient base, the reputation, the systems — is usually the largest part of a practice purchase price, and SBA 7(a) loans are specifically designed to finance it. That is the main reason SBA financing dominates dental acquisitions: conventional loans often balk at intangible-heavy prices.
How long does dental practice acquisition financing take to close?
SBA acquisition loans commonly take 60 to 90 days from letter of intent to close, including underwriting, appraisal, and SBA review. Bank loans run a similar or longer timeline; alternative and bridge financing can fund in days to weeks but at higher cost. Build the timeline into your purchase agreement so a slow close does not cost you the deal.
Can I finance a dental practice purchase and the building in one loan?
Yes, with SBA 7(a): one facility can cover the practice and owner-occupied real estate together, with the real-estate portion on a longer term (up to 25 years) than the goodwill portion (up to 10 years). SBA 504 is the alternative for real estate and major equipment, but it cannot finance goodwill — so a combined practice-plus-building deal usually runs through 7(a).
Can a first-time buyer with student debt buy a dental practice?
Yes — it is the most common buyer profile. Lenders weigh the practice's cash flow and your debt-service coverage more than your student-loan balance alone. A practice whose cash flow covers the acquisition loan payment, your salary, and your student-loan payments is financeable; a practice that only covers the loan payment is not. Run the coverage math before you make an offer.
What is an associate buy-in, and how is it financed?
An associate buy-in is a staged purchase: the associate buys a minority share first, then the remainder over an agreed period. It is usually financed with a smaller SBA loan, a seller note, or a combination, and it lets the buyer prove out the practice — and the seller test the successor — before the full price changes hands. The staged structure also spreads the down payment across two transactions.
How do DSO rollups change what a practice is worth?
DSO buyers price on adjusted EBITDA and pay higher multiples than doctor-to-doctor buyers, because they spread overhead across many locations. A single-doctor practice sold to another dentist typically trades on a percentage of collections; the same practice sold into a rollup may command a meaningfully higher multiple — but usually with part of the price in rollover equity or an earnout, not all cash at close.
Buying a practice? Get the math done before the offer
Tell us about the practice and send the seller’s production and collections reports — we will run valuation, down payment, monthly payment, and coverage with you, and arrange bridge financing for the LOI-to-close gap. No obligation.
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