Dental equipment loans are specifically designed for dental businesses, and they offer different perks to dentists. Most of the financing is done through manufacturer financing but those rates are rarely competitive. Dentists choose manufacturer financing most often because it’s more convenient and faster than going to their own bank and going through the process of getting financed. Ultimately, the rate tends to be better by going through your bank.
Approval with Bad Credit?
Credit worthiness is important when getting equipment. There are a number of factors that play a role in whether or not you get financed. With a dental practice, financing depends more on a practice’s credit rating rather than a personal credit rating. A dentist with average or mediocre credit can get dental equipment loans if his dental practice is successful and profitable. This means it is producing a positive cash flow. Approval is easier if you have good personal credit but if not, banks can secure an approval through leveraging collateral.
Using Collateral for Dental Equipment Loans
Collateral can be a number of things, the easiest being the equipment purchased. The equipment is usually valued much lower than its purchase price. This is primarily due to the accelerated depreciation of the asset and its value by the time it’s paid off.
If a dental practice owner owned the real estate his practice is on and there is a lower than 70% loan to value (LTV) equity in the business, then the approval is much easier.
What If the Dental Practice Is New?
If a dental practice owner’s practice is new but he owns the real estate his practice is on then it can still be used as collateral if the equity LTV is lower than 70%. However, if the practice is a leased office then it will boil down to the credit worthiness of the business. If there is no credit built into the business and the equipment of the total practice is not enough to finance a new dental equipment loan, then it will boil down to the dental practice owner’s personal credit and guarantee. In this case, if the personal credit is not good enough, preferably over a 700 FICO score, the loan will most likely not be financed.
What Can a Dental Practice Owner Do to Raise Credit?
Paying off some debts will always improve both your credit score and the amount of untapped credit available for use. Make sure payments aren’t late and if there are bad things on your credit report that are not accurate, get them cleared off.
For a new dental practice, work on gaining credit through secured business credit cards and pay them off each month. Get phone lines and internet through the business’ name to build a good payment history. Over time, the credit worthiness will improve.
Once a dental practice owner is ready to secure a loan and wants an easier way to find financing with lower rates than the manufacturer financing option, then he should head over to Magilla Loans to see what programs best assist dental practices.