Dental Practice Acquisition: SBA 7(a) Loan Guide

Buying a dental practice is the most common path to practice ownership, and SBA 7(a) is how most of those deals get financed. The process has a defined playbook — but there are specific dental nuances that determine whether a deal closes smoothly or stalls at underwriting.

How Dental Practices Are Valued

Dental practice valuations use two primary methods:

1. Percentage of collections: The traditional method. Most general practices sell at 60–85% of one year's gross collections. A practice collecting $800K/year might sell for $480–680K.

2. EBITDA multiple: More precise, increasingly common. Most general practices sell at 2–4x EBITDA. Specialty practices (oral surgery, orthodontics, periodontics) sell at 3–6x EBITDA.

What drives value up:

Strong active patient count (1,800–2,500 is excellent for a solo)

High hygiene percentage of production (40–50% = recurring revenue anchor)

Fully digital (digital X-ray, CBCT, intraoral cameras, digital impressions)

Long-term leases with renewal options

Strong PPO participation with above-median reimbursements

Established staff who will stay

What drives value down:

Heavy Medicaid dependence

Aging equipment that needs replacement

Lease expiring soon

All production tied to the selling dentist with no hygiene base

Structuring the Acquisition Deal

Standard structure for a $750K practice:

ComponentAmount

SBA 7(a) loan$637,500 (85%)
Buyer cash injection$75,000 (10%)
Seller carry note$37,500 (5%)
Total$750,000

The seller carry note is subordinated to the SBA loan and typically has principal payments deferred for 24 months (SBA requirement). After 24 months, the seller receives principal + interest on the note. This structure is well-understood by both lenders and dental practice brokers.

For deals with real estate: The practice goodwill/assets go through SBA 7(a); the real estate can be financed simultaneously through SBA 504 (if the building is $500K+) or added to the 7(a) project if smaller.

Patient Chart Audit: Do This Before You Commit

Before signing an LOI, request and conduct a patient chart audit. This is the single most important due diligence step in a dental acquisition. You're counting:

Active patients (seen within 18 months): this is the revenue base

Patients with unscheduled treatment: this is your growth opportunity — these are diagnosed patients who haven't completed treatment

Recall compliance rate: what percentage of active patients are on a regular hygiene schedule?

New patient flow: how many new patients per month? Where do they come from?

A practice showing $800K in collections but only 900 active patients (vs. 1,800 for a healthy practice of that size) is running off patient attrition. The collections are real but unsustainable.

Transition Agreement: What SBA Lenders Require

Most dental SBA lenders require a formal transition agreement with the selling dentist. Standard terms:

Seller remains active in the practice for 3–6 months post-closing

Seller introduces the buying dentist to patients verbally and in writing

Seller helps with insurance credentialing of the buyer

Non-compete: 3–5 year radius restriction (5–10 miles typically for dental)

Non-solicitation: seller cannot solicit former staff or patients

Without a credible transition plan, lenders worry about patient attrition — particularly if the selling dentist has strong personal relationships with a large portion of the patient base.

Insurance Credentialing: The Hidden Timeline Risk

Dental insurance credentialing (getting in-network with PPOs) takes 60–120 days after application. This is a critical path item in practice acquisitions:

The selling dentist's PPO contracts do not transfer automatically

The buying dentist must independently credential with each plan

During the credentialing gap, you can bill out-of-network (collecting less) or the selling dentist can continue billing under their NPI during transition

Practical implication: Start your credentialing applications immediately after LOI — before the loan closes. The 60–120 day window means you could be 2–3 months into ownership before your in-network billing is fully active.

What Kills Dental Acquisition Deals

Patient attrition after announcement — some practices see 10–20% of patients leave when they hear the practice is sold. Understand this risk before pricing your offer.

Lease issues — seller's lease expiring in 18 months with no renewal right is a major problem. Ensure a long-term lease (5+ years) before proceeding.

Equipment failure at closing — get an equipment assessment. Old compressors, aging X-ray equipment, and failing dental chairs that fail post-close become your problem.

Staff departures — if all key staff leave when the seller leaves, you inherit an empty office. Interview staff before close; offer retention bonuses for key team members.

Lender appraisal below purchase price — SBA lenders order an independent valuation. If your offer is above the appraised value, you need to cover the gap with cash or renegotiate.

Pre-approve your dental acquisition financing at 3A Lending in 24 hours →