Is it your big dream to own a practice? Do you imagine what it would be like to run your own business? Maybe being an employee is just not for you. Here are some common misconceptions that students have about money when it comes to starting or buying a practice.
Myth No. 1: Private practice is out of reach. I might as well go corporate.
Do you shut down your dreams the moment reality sets in, and you do the math on what it would take to actually get a private practice off the ground? Well, not so fast. Corporate dentistry is a great place to gain experience, but if your dream is to have your own practice, there are resources available to you. There are practice management consultants, accountants, attorneys and financial advisers out there who specialize in helping dentists. Interview a couple of them to get some ideas.
Myth No. 2: I’ll need a lot of cash as a down payment.
This is simply not true. You need to have some cash — not necessarily to put down — but to show that you have savings in the bank. Some lenders will allow 100 percent financing, but they typically like to see personal savings in the range of 7–10 percent of the loan amount. They ask for this because it shows commitment on your part, and when you have skin in the game, chances of your success will be higher. It’s human nature to care more for the things in which you are personally invested.
Myth No. 3: No one will lend me money because I have so much debt.
Also not true. Many banks have special lending divisions for dentists and other health care professionals. They know your marketplace: that training is expensive and debt loads are high. What they also know is that your earning potential is high, particularly in the dental specialties. They are banking on your high cash flow to support your loan payments.
Myth No. 4: I need to pay off/pay down my student debt first.
Well, if you wait for that, you might be waiting quite a while (and forgoing your future in the process). Whether you will be able to afford your practice loans has a lot to do with your cash flow, which is impacted by your student loan payments. It’s all about monthly payments: The lower your monthly student loan payments, the more cash you have on hand, the higher the probability that you will be able to secure a practice loan. When you look at your student loan repayment options, you will want to pick one that will maximize your cash flow (which is why Income-Based Repayment [IBR] may make sense for some students) until you get your practice going, and then you may consider refinancing. Speak to a qualified financial professional about the kind of student loan repayment plan that best suits your situation.
Myth No. 5: I’ll make a lot of money starting Day One.
While dentistry can be lucrative, remember that you’re talking about starting a business. Every business has a ramp-up period, so you’ll need to be patient. If you are a general dentist starting from scratch, you will need to invest time and marketing to build up your practice. If you are a specialist, you will need to cultivate relationships that will yield referrals to your practice. If you are buying into an existing practice that comes with patients, and you borrow money to do so, you will need to make loan payments, which could easily reduce the revenue coming in. The key is to manage your expectations, be realistic and be disciplined about building a cash reserve to get you through the early days of running your own practice.
Practice ownership is possible. Don’t let fear and misinformation get in the way of realizing your dreams. Speak with qualified lending professionals, financial advisers and other guides to discover how it may work for you.
~Christian Pearson, SE Financial Services Professional/National Director of Dental Partnerships, Treloar & Heisel, Inc.
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About Treloar Heisel
Treloar & Heisel is a premier financial services provider to dental and medical professionals across the country. We assist 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 a higher level of service. Visit us at Treloaronline.com