Dental equipment financing

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    Chris Godfrey

    Page written by Chris Godfrey. Last reviewed on July 19, 2024. Next review due October 1, 2025.

    Dental care is a huge industry in the US, covering everything from general oral care and restorative dentistry, to prosthodontics, cosmetic dentistry and more. 

    Dentists utilize a vast array of equipment to deliver their services, and these machines, tools and technologies are often highly complex and need constant updating. Because this equipment can be expensive, most dental providers choose to buy or lease the machines and tools they need using equipment finance. This reduces strain on cashflow, provides practitioners with the latest devices, and helps to continually improve the efficiency and quality of the dental care they provide. 

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      What is dental equipment financing?

      Dental equipment financing refers to specialist business loans and leasing programs that help US dental businesses obtain the equipment they need. This type of financing is more readily provided by online lenders than traditional banks and credit unions and it can be used to buy new or used dental tools, technology and machinery.

      How dental equipment financing works

      Dental equipment financing comes as two options: Business loans to buy dental equipment, and leasing programs to rent dental equipment. (Some leasing deals may allow you to buy the tools, tech and machinery when the rental contract ends). 

      Let’s look at these options in more detail:

      Buy the equipment with a business loan

      All business loans for the purchase of dental equipment work with the same basic format: You borrow a sum of cash and then repay it over time. Interest charges and fees are added to the principal amount you borrow. The lender may retain a lien on the equipment during the term of the loan. At contract end you’ve paid the loan off and you own the equipment outright.

      Advantages of business loans for dental equipment:

      • Regular repayments can improve your financial planning.
      • You own the equipment at contract end.
      • Could allow you to buy better and a more expensive dental equipment than buying with cash.
      • May be more tax efficient that paying with cash.

      Disadvantages of business loans to buy dental equipment:

      • Some loans may require added collateral or a personal guarantee.
      • Interest rates on some business loans can be high
      • At contract end the equipment may still need replacing or upgrading

      Lease the equipment with a finance or operating lease

      Leasing works differently from business loans. With a lease, you’re not buying the dental equipment, you are taking out a long-term rental. Depending on the type of lease you choose, you may have the option to buy the equipment at contract end for a pre-agreed sum, (which could be as low as $1 but is more typically the residual value of the equipment – which means what it’s worth in used condition). 

      Because you are not repaying the whole cost of the equipment, leasing usually requires lower monthly payments than business loans. You may also pay a smaller down payment – perhaps equal to one or two month’s repayment instalments.

      If you choose not to buy the equipment at the end of the lease, (or you’ve chosen an operating lease that forbids it), the machinery, tech and tools go back to the lender. You would then need to take out a new lease and obtain replacement equipment. (Which could allow you to buy more modern and up to date machinery and tools).

      Some lessors (lenders) may give you the option to extend the lease if you prefer to keep the equipment but do not wish to pay the residual. 

      Advantages of leasing for dental equipment:

      • Pay a lower monthly sum.
      • May pay a lower down payment.
      • Could allow you to obtain better and more expensive dental equipment than a business loan.
      • No added collateral required.
      • May have the option to buy the equipment at contract end.

      Disadvantages of leasing for dental equipment:

      • May not own the equipment at contract end.
      • There may be restrictions on the types of equipment you can lease.

      What types of dental equipment are essential?

      Dental equipment financing can be used to purchase or lease dental machinery, technology, tools and more. Essential equipment that may be obtained with dental financing includes:

      • Dental patient chairs
      • Surgery furniture, including cabinets, tables and chairs
      • Lighting systems
      • Refrigerators
      • X-ray and other imaging equipment
      • Sterilizing equipment
      • Drill and suction equipment
      • Sinks and hygiene ware
      • Utility equipment
      • Hand tools
      • Client waiting room furniture
      • Office furniture
      • Computers and other technology

      When should I consider dental equipment financing?

      If you’re starting a new dental practice, or expanding your current dental business, it makes more sense to obtain the equipment you need with a loan or lease. This allows you to retain the bulk of your working capital to pay for other essential needs, such as recruitment and marketing.

      Alternatively, dental equipment that is no longer fit for purpose because it’s either out of date, needs constant repair, or is incompatible with other modern systems, is a major drain on your dental business. Upgrading or replacing your current equipment with a financing program can make your practice more efficient and profitable. 

      What options are available for dental equipment financing?

      You can either buy your dental equipment with a business loan or rent your equipment with a business lease:

      Business loans to buy dental equipment:

      • Equipment financing: The most common way to buy dental equipment, equipment loans are ‘self-collateralizing’ – like auto loans – you use the equipment as you pay for it, while the lender maintains a lien on the machinery. Once you pay the loan back, the lender releases the lien, and you own the equipment outright. No added collateral is required.
      •  Business term loan: The standard type of business loan. You receive a single, lump-sum cash injection and then pay it back in regular instalments, plus interest and any fees, over a fixed period of up to 25 years. Collateral may be required.
      • Business line of credit: This is a business loan that functions like a high-value credit card but comes with lower interest rates and fees. Withdraw as much as you want when you want from a loan facility up to the limit of your borrowing. You only pay interest on the sums you withdraw, not the whole line. This can significantly reduce your borrowing costs. Collateral may be required.
      •  Merchant cash advance: Available for dental practices that accept customer payments by credit and debit card. You borrow against the value of your card sales. As your card sales increase, your borrowing limit goes up. Pay the loan back with a fixed percentage of your card sales on a daily, weekly or monthly basis. Your sales act as security for the loan, no added collateral is required.
      • Business credit cards: If you have good credit, it may be possible to secure a business credit card with a high limit to buy your dental equipment. The application process is usually online, fast, streamlined and does away with piles of paperwork. Note that business credit card interest rates are typically much higher than for many other types of business loan. Collateral is usually not required.

      SBA loans

      As well as the loan options shown above, dental organizations may also seek an SBA loan. Provided by lenders who are part of the Small Business Administration’s (SBA) lender network, and partially backed by the US Government, these loans can provide up to $5million to qualifying borrowers with repayment terms as long as 25 years. 

      • SBA 7a loans: SBA 7a loans usually come with much lower interest rates and fees than other commercial lending, but meeting their strict rules of eligibility can be tough for many businesses. As well as an approval process that can take several months, organizations will typically need to have been in business for at least four years and have annual revenues over $180,000. Your personal credit score must be at least 680.
      • SBA Express loans and Micro loans: SBA express loans are a faster alternative to the standard 7a loan program. Offered by the same pool of lenders, express loans can give businesses up to $500,000 and you will usually get a ‘yes/no’ indication within 36 hours of making your application. Note that SBA express loans are only 50% backed by the US Government, so lenders carry more risk. This means interest rates and fees are higher with express loans than their 7a counterparts. SBA Micro loans are available up to $50,000 and can usually be secured with FICO scores as low as 500, or even with no credit score at all. However, you will be required to provide collateral or a personal guarantee that makes you personally responsible for the debt, not your dental business. 

      Leasing programs to rent dental equipment

      Leasing programs for dental equipment are available in two formats:

      • Finance lease: A finance lease gives the lessee (you) the option to buy the dental equipment at contract end. You provide a down payment and then pay a monthly rental charge to use the equipment during the contract period. At the end of the lease you can either pay the residual sum and keep the equipment, extend the lease and continue to rent, or give the equipment back to the lessor. A finance lease may or may not include maintenance and servicing of the equipment. You will usually be responsible for equipment insurance.
      • Operating lease: An operating lease is a simple long-term rental agreement. There is no option to buy the equipment at contract end. You provide a down payment and then pay a monthly rental charge to use the machinery, tools and tech. When the lease expires, the equipment returns to the lessor. The lessor provides equipment maintenance and servicing, but you will usually be responsible for insurance. An operating lease often comes with lower monthly payments than a finance lease.

      How to qualify for a dental equipment loan

      Although every lender will have their own qualifying criteria, some fundamental rules apply. In most cases, lenders will need to see:

      • At least six months trading history.
      • Regular revenue stream.
      • Good business and personal credit scores.
      • Enough surplus working capital to meet the loan/lease repayments.

      You will also usually need to provide bank statements, tax returns and other financial documentation. However, even if your credit score is weak and/or you’ve been turned down elsewhere, it may still be possible to get the dental equipment financing you need. To find out if you qualify before you apply, contact Swoop to discuss your funding needs with a finance expert.

      Can I get dental equipment financing with bad credit?

      Probably. Although you typically need a personal (FICO) credit score of +640 to obtain dental equipment financing, some lenders may offer funding to borrowers with scores in the mid-500s, although you should expect to pay a higher interest rate, borrow a smaller sum, and pay a larger down payment. As a rule of thumb, the more expensive the dental equipment you want to buy, and the more you need to borrow, the better your credit score needs to be.

      How to get dental equipment financing

      Obtaining a dental equipment loan or lease is no different to obtaining most other forms of business finance – preparation is key:

      • Identify your need for the loan.
        Why do you need the money? You must present a strong case for funding to secure dental equipment financing and your financial records must support this need, indicating how the loan will deliver your plan – and critically, how you will pay the loan back. 

      • Check your personal and business credit scores.
        It is common for mistakes to occur on credit reports and incorrect information could have an adverse impact on your loan application. If there are errors, get them fixed before applying for finance – and be aware that fixing a credit score can take time and there are no ‘fast credit repairs’ despite the many promises from online ‘credit doctors’ who say they can perform miracles for your score.

      • Get your paperwork in order.
        Depending on the type of financing you apply for and how much money you need, lenders may need to see bank statements (at least 6 months), balance sheet, profit and loss statements, cashflow projections, list of debts, list of assets, customer database, documents that reveal the structure of your business (corporation, partnership, LLC, etc.), certificates of good standing, tax returns and more. Loans typically require more paperwork than leasing and the larger the sum you borrow, the more documentation the lender will ask to see.

      • Research and compare lender programs:
        Interest rates and fees for dental equipment financing can vary significantly, so it makes sense to shop around before settling on a deal. You could do this by approaching banks, credit unions and online lenders one by one, or you can use the services of a
        loan marketplace that will introduce you to a choice of equipment loans from different lenders. Some marketplace platforms can also give you advice and help you with the application process. This can be especially useful for borrowers who have never taken out an equipment loan before.

      Apply: Make sure you’ve provided all the necessary documentation and have answered any extra questions the lender may have. Once you’ve submitted your application it may be worth checking with the lender to be sure they have your package and to ask if there’s anything else they need. Keep in mind that some financial institutions – typically banks and credit unions – will take longer to review your application than online lenders, where you may get an approval in a matter of hours or even minutes.

      Get started with Swoop

      No matter if you’re seeking your first equipment loan or you’re a seasoned borrower, working with business finance experts can make all the difference when applying for funding. Contact Swoop to discuss your borrowing needs, get help with your application and to compare high-quality dental equipment financing deals from a choice of lenders. Give your dental practice more bite. Register with Swoop today.

      Written by

      Chris Godfrey

      Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Wells Fargo Bank, Visa, Experian, Ebay, Flywire, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of US consumer and business finance.

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      At Swoop we want to make it easy for SMEs to understand the sometimes overwhelming world of business finance and insurance. Our goal is simple – to distill complex topics, unravel jargon, offer transparent and impartial information, and empower businesses to make smart financial decisions with confidence.

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