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In order to grow your dental practice, you have to make financial decisions every day. I know it’s not what you envisioned when you went to dental school. You wanted to be on the front lines of medical innovation. And help patients achieve brighter, healthier smiles. But along with being a dentist, you have to be a savvy business manager. Small business loans for dentists can help you be both.

If you had enough cash on hand, how would you grow your practice? Dentists I talk with say they want to:

  • Expand by remodeling your present location, relocating to a larger space or opening a second dental office.
  • Add new dental equipment
  • Upgrade office technology
  • Hire more staff
  • Increase cash reserves
  • Cover expenses in a slow month
  • Handle unforeseen repairs
  • Ramp up for back-to-school or other peak times
  • Boost your marketing

Marco Carbajo is a small business financial consultant. He says a study from the American Dental Trade Association (ADTA) showed “access to capital is one of the key factors that determine a dental practice’s productivity and sustainability.” Unsecured business loans can give you that vital access to capital.

WHAT ARE UNSECURED BUSINESS LOANS?

When you take out a traditional bank loans for your practice, it is secured with physical assets. Sometimes the collateral is an integral part of the loan. Real property that secures a real estate loan. Or the medical equipment you buy with an equipment loan. You can also use assets like these to get a business loan you will use for some other purpose. Typically, secured business loans are large, and you repay them over many years.

Often you don’t need so much money. And you don’t want to be saddled with fixed monthly payments for a long time. Or your dental practice may not qualify for a secured business loan. That’s where unsecured business loans come in. Just as the name implies, you borrow money without putting up collateral.

Examples of unsecured business loans include:

  • Revolving business line of credit (LOC). Your practice may be able to get an LOC from your regular business bank. Or you can look to an alternative lender. The nice thing about a business line of credit is that money is available when you need it. The key is to borrow only as much as you need now, then repay it quickly. That way you’ll pay minimal interest.
  • Business credit card. Like a line of credit, you use this only as you need it. Typically small businesses use their card for supplies and other smaller, recurring operational needs. If you’ve been using personal credit cards to make businesses purchases, stop doing that. It’s much “cleaner” to keep business and personal finances separate. And it’s important to establish a business credit score for your practice. You’ll need that when you want to apply for a large, long-term loan. Good credit can get you better terms for unsecured small business loans, too.
  • Short-term business loans. You may not need collateral to borrow a smaller amount of money and repay it within the year. These unsecured business loans are sometimes called “signature” or revenue-based loans. Lenders may require you to have good credit, but proven income history is the most important. In some situations, this type of business can help you improve your credit.
  • Accounts receivable loans, or factoring. Technically, there is “collateral” behind an A/R loan – the receivables you’re selling. But once you sell them to a third-party lender, the receivables are no longer your assets. Regardless, accounts receivable loans offer both quick cash and a chance to get out of the collections business. Most dentists love that!
  • Merchant cash advance, or MCA. Instead of selling unpaid receivables to a third party, you borrow money against future credit or debit card sales. Interest can be quite high with these small business loans, so you have to be careful. That said, if your dental practice has bad credit, merchant cash advances can help rebuild your credit.

There are excellent reasons why your dental practice should use unsecured business loans. But these small business loans also have drawbacks.

PROS

  • Easier to get. No collateral required, so you don’t have to business (or personal) assets at risk. And there’s far less paperwork involved.
  • UCS typically offers 24-hour approvals and funding within 72 hours.
  • Get the right amount of money when you need it, use it for whatever you need.
  • Bad credit may not be a problem.

CONS

  • Higher interest rates than business loans from a bank.
  • Higher payments, thanks to higher interest rates. You must be able to afford them and pay them on time. (Remember, though, accounts receivable and merchant cash advance loans don’t have payments.) At UCS, we offer five options to make repayment easier for your practice. You can pay daily, weekly, bi-weekly, monthly or via credit card transactions.
  • Can be more difficult to qualify for, because there is no collateral to reduce the lender’s risk.

HOW UCS HELPS

Unsecured business loans can open many doors for your dental practice. But just because you can get one doesn’t mean you should. I’ve talked about this before, because it’s so important for small business owners. Borrowing is an essential management tool – if you use it strategically. That way you can get all the benefits you want or need without sacrificing your good credit or reputation with lenders.

We’re seeing a lot more women in dentistry these days. Here at UCS, we like that. We’re bullish on women entrepreneurs. And we want you to know there are special small business loans just for women. And other resources to help you grow your dental practice. We can help you uncover options that would work well for you.

One final note. Strategic borrowing is smart. Having too much debt is not. Do everything you can to reduce debt. Chris Salierno, DDS, is Chief Editor of DentistryIQ. He says the companion to reducing outgo is increasing revenue. Dentists can produce more dentistry, raise fees, or improve collections. He offers “a ridiculously simple system to evaluate: asking for payment.” Unsecured small business loans can put more money in your pocket, too.

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