Justin Rust: Does it make sense to work with a specialty lender?

In this edition of Let’s Talk, Christian Pearson, national director of dental partnerships at financial services provider Treloar & Heisel, speaks with Jon Burns, vice president of Bank of America Practice Solutions, a specialty division focused on providing financing to dentists who seek to establish their own practices, about the benefits of working with a specialty lender.

Christian: In our May blog post, you talked about the basics of borrowing money to start a practice. You mentioned to me that working with a specialty lender – someone who understands the dental market – is important. What’s the benefit of working with a specialty lender versus any bank that can offer a “good” loan?

Jon: There’s this misconception that a cheap loan is a “good” loan, and that’s not necessarily true. Price shouldn’t be the only factor you consider when comparing one loan with another. What a dentist needs to be focused on is getting the right loan, not just the cheapest.

Dentists have needs that are unique to them. It’s more expensive to build a dental office than really any other small business that’s out there. Depending on your location, it might cost $110 to $200 per square foot, or sometimes even more, to build the practice. And that doesn’t necessarily include equipment, supplies and everything else a dentist needs.

The bank you work with needs to understand that what’s important to a first-time practice owner is going to be 100 percent financing. You may have one bank that is willing to offer a lower interest rate, but they need the dentist to put $50,000 down. Is that the best financial decision for the dentist? Probably not. If you’re a first-time practice owner, $50,000 might be all the money you have. So you’ve secured a lower interest rate, but in exchange, you gave this bank every bit of money you have. Now what happens if you run into some trouble, need an emergency cushion or the practice doesn’t start as quickly as you thought it would? You’re in a bind.

Another thing the bank you work with needs to understand is that it takes time for a practice to build up a revenue stream. We recognize this reality, so one thing that we do is to offer a graduated payment structure. It’s tough as a startup to start making full loan payments right from the beginning. Our loans have no payments while you are building the office, and a 14-month grace period thereafter, which allows your practice to actually take off before you’re expected to make payments.

Also, a dental practice is like any other business. It requires investment in people, technology, marketing and so much more. On all of our lending to startup dentists, we include $75,000 of working capital, which is intended to help the dentist get the practice off the ground. Typically, we see our clients spend this working capital on things such as marketing or operations.

These are just a few of the top reasons to work with a lender who specializes in lending to dentists.

Christian Pearson is the national director of dental partnerships at Treloar & Heisel, a premier financial services provider to dental and medical professionals across the country. Treloar & Heisel assists thousands of clients from residency to practice and through retirement with a comprehensive suite of financial services, custom-tailored advice and a strong national network focused on delivering the highest level of service.

Jonathan Burns is part of the Bank of America Practice Solutions team that focuses on providing dental practice owners a single, convenient source for financial services – from practice acquisition and equipment financing to practice expansion and commercial mortgage loans.