Owning a dental practice comes with significant responsibilities that extend beyond providing quality care to patients. Dentists face unique financial pressures due to the high costs of equipment, staffing, and maintaining a consistent patient flow.
Over time, these demands can take a toll on the financial health of the practice, leading to situations where debt becomes overwhelming, or cash flow issues arise. This is when effective financial planning becomes critical to safeguard the practice's future.
Common Financial Pressures for Dental Practices
Dental practices operate in a high-cost environment, with multiple expenses constantly vying for attention. Some of the most significant financial pressures are:
- Equipment Costs: Dental equipment and technology are expensive, and many practices require substantial investments in specialized machinery such as X-ray machines, dental chairs, and sterilization equipment. As technology advances, keeping up with modern tools often means spending additional money.
- Staffing and Payroll: Dental practices rely heavily on qualified staff like dental hygienists, assistants, administrative personnel, and office managers. Meeting payroll obligations can be particularly challenging during times of slow patient volume.
- Rent and Overhead: The cost of leasing or owning office space, combined with utilities, insurance, and office supplies, creates ongoing financial burdens. In cases where a practice expands or opens additional locations, these expenses increase significantly.
- Patient Flow and Revenue Cycles: Dentistry is tied to the number of patients seen and procedures performed. Any disruption to patient flow—whether due to economic downturns, changes in insurance coverage, or health crises like the COVID-19 pandemic—can drastically reduce revenue.
- Loan Repayments: Many dental practices take on loans to cover startup costs or expansion efforts. Servicing these loans, along with credit lines and other business-related debt, can become overwhelming if revenue drops unexpectedly.
Did your business take out an SBA EIDL loan during COVID-19? Forgiveness is not an option. Explore your loan repayment and restructuring options.
4 Options for Addressing Financial Challenges
When a dental practice encounters financial difficulties, several debt relief strategies can improve the situation, prevent long-term damage, and protect personal assets.
Please note that there are no universally right or wrong answers in the options listed below—each requires careful consideration of a practice’s financial standing and the owner's long-term goals.
1. Loan Modification
Many dental practices rely on loans to finance equipment purchases, office space, or business expansion. When repaying these loans becomes difficult, it may be possible to pursue loan modification options through the lender. In many cases, creditors are willing to work with businesses that show a proactive approach to addressing their financial challenges. However, it’s important to keep in mind that some loans, like economic injury disaster loans from the Small Business Administration, cannot be modified without a business bankruptcy claim.
Loan modification involves adjusting the terms of the loan, such as lowering the interest rate or extending the repayment term. This can reduce the monthly financial burden and improve the practice’s cash flow.
2. Business Restructuring
In some cases, it’s possible to regain necessary income by restructuring business assets. This could include:
- Reorganizing the practice ownership structure
- Consolidating staff and operations
- Selling off underperforming assets
Before making one or more of these changes, it’s important to consider the impact they may have on team morale, patient care, and quality of service. Drastic changes to any of these could make matters worse.
3. Business Debt Restructuring
If financial challenges persist, a more comprehensive business debt restructuring may be necessary. In some cases, restructuring the debt through bankruptcy can provide a path toward financial recovery while preserving the operations of the dental practice.
For example, Chapter 11 Subchapter 5 bankruptcy allows businesses, including dental practices, to restructure their debts while continuing to operate. This process offers protection from creditors, allowing the practice time to develop a viable plan to address its financial obligations.
4. Long-term Planning with Finance & Legal Professionals
Beyond addressing immediate financial challenges, dental practices need to engage in long-term financial planning. This includes developing strategies for managing debt, building emergency savings, and ensuring that the practice can sustain operations during periods of economic uncertainty.
Working with financial professionals can help create a robust financial plan that takes into account the unique demands of owning a dental practice.
In addition, working with legal professionals well-versed in business law, business debt relief, and bankruptcy can help safeguard a practice’s assets in the short term and prevent future financial stress.
Don’t Let Your Dentistry Drown in Debt
Facing financial challenges can be daunting for dentists, but there are options available to regain control of a practice’s financial future. At The Lane Law Firm, our business debt relief attorneys support dental practice owners who need financial assistance. From exploring loan modification options to guiding the practice through Chapter 11 Subchapter 5, our firm can help practices remain open while addressing financial obligations.
Start exploring your options today by scheduling a free, no-obligation consultation.
