The Unrealized Financial Power of the Dental School Graduate

Debt and More Debt: What Kind of Financial Power is Available With It?

Besides a terrific dental school education, which almost assuredly gets the graduate ready for the clinical side dentistry, what else does he or she have besides the diploma? One thing that those who must

finance their education surely have is a large amount of debt. The financial rewards of dentistry may be one of the items that

those who entered dental school felt would be available to them at some time after graduation. Like most young people today, the time when the rewards will become available was a wish for the present, rather than for some time in the future. So what occurs when the youthful graduate begins a job search as an associate, or when a more mature graduate looks to join a practice with some type of acquisition structured? What does the debt mean to the graduate

or to the potential partner? What does the debt mean to the potential lender who will assist the graduate in the financing of the acquisition or startup of his or her own dental practice, at a later date?

Loan Payments and Borrowing Capacity

It is a strange occurrence that is taking place with financing today as one reads the papers and becomes aware of lenders holding back to small business owner’s

borrowing requests. Dentists, especially those who have just graduated, may feel that they don’t have much of an opportunity to borrow, even for the acquisition of an established dental practice. That is an incorrect assumption. Dentists who have advisors assisting them with the financial side of their dental practices know how to arrange borrowings for recent dental school graduates, as well as for the mature practice. Historically, the financial history of dentists has made an impact on lenders who know how to lend to dental practices and to dentists. There is plenty of money available for the dental school graduate from the lending community, provided the graduate has reasonably good credit. It may be surprising, but lenders covet the ability to lend to dentists whether

they are recent graduates or not. Their feeling is that a loan to a dentist is a low risk opportunity for the banks to receive income. The rates and terms of payment may not be to the graduate’s liking, but given a history of on-time payment, the graduate will be able to refinance a first loan and obtain much better rates and terms. Banks with a specialty in lending to dentists count on the financial future of the graduate based on the lenders’ own experience with graduates and seasoned dentists from the past.

What Type of Debt is Acceptable to a Dental Lender and what is not?

The recent graduate may not categorize debt as a dental specialty lender does.

What types of debt exist? What is an

acceptable type of debt and what is not? Where does the graduate go to borrow to

buy into a dental practice or to open a brand new practice, as an example? There are many types of debt, and only a few will be addressed in this article. The debt incurred from education is fairly common and one that dental specialty lenders will accept from a graduate. The payment for that debt should be on time and reasonable compared to the graduate’s current or projected income. If there is an arrearage on a payment, a solid explanation must be forthcoming or an application will most likely be denied for additional borrowing. Assuming that the educational debt is being paid on a current basis, the amount outstanding is not that critical, since a dental specialty lender will look at the potential of the graduate’s financial success for the repayment schedule If a loan is requested to acquire an interest

position.

in a dental practice, or to open a startup, the amount of outstanding indebtedness is not important, as long as the payment history is excellent.

Credit card debt is not a good thing from an interest rate stand point, as well as from an economic and credit worthiness position. Lenders are afraid of bad financial habits like borrowing on

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credit cards. However, if credit card debt does exist, on time monthly payments are important. There may be reasons for the credit card debt such as using it for the ability to eat, during dental school. That is a good reason for credit card debt. Often, a lender will assist in lending enough to retire the credit card debt with a more reasonable interest rate and term than the credit card offers. The most important thing is that all payments remain current. The term “dental lender,” continues to appear in this article. The graduate will learn that it is very difficult to borrow from a local bank – even if there is a friend of the family who is a board member. The local banks typically need good collateral for borrowing, don’t like to see too much debt on someone’s loan application and don’t understand, because of a lack of history in lending to dental school graduates, the safety net that the dental profession affords to a

Credit card debt is

not a good thing from an interest rate

PRACTICE LISTINGS

For loan collateral, debt protection, and financial security, dentists rely on the ADA Insurance Plans for best-in-class life and disability insurance, including free coverage for ASDA members during dental school. ADA members benefit from group rates that keep premiums low and hard to beat. GreatWest Life & Annuity Insurance Company insures the ADA Insurance Plans, and protects more than 130,000 dentists, dental students, and their families every year.

ADS Dental Transitions (888) ADS-4237 www.ADStransitions.com

ADS is the nationwide leader in dental practice sales, associateships, buy-in/buy-outs, partnerships and appraisals. ADS is comprised of the industry’s most experienced professionals, including dentists, attorneys, and CPAs. We can help you with each step of your next transition. To view a complete list of practice opportunities available in your desired area, visit us at ADStransitions.com. Please see our ad on page 17.

ADS South is the premier dental transition organization in the Southeast. We provide associateship placement, dental practice sales, appraisals, and expert testimony services. Our company was founded over 26 years ago by Earl M. Douglas, DDS, MBA, BVAL, and we continue to control the cutting edge of transition technology. Please see our ad on page 5.

At Aspen Dental we recognize that our success is a direct result of empowering and supporting ambitious dental professionals. We provide a professional, fast-paced, entrepreneurial work environment based on a mutual respect that keeps our interests aligned together, we build and develop successful, patient focused dental practices. Please see our ad on page 9.

Comfort Dental www.comfortdental.com

The Best of Both Worlds At Comfort Dental, we combine the old-style neighborhood dental practice with today’s modern group practice. Equity ownership, autonomy, management of your own business, and long- lasting relationships with your patients is combined with our economics of scale, prime locations, mass marketing, and overhead control. It truly is the best of both worlds. See our ad on page 15.

Heartland Dental Care is one of the leading dental service organizations in the United States with more than 425 affiliated dental offices within 20 states. It supports over 700 affiliated dentists and 5,000 team members through continuing professional education and leadership training along with a variety of non-clinical administrative services. Please see our ad on page 11.

Henry Schein Nationwide Dental Opportunities is the perfect solution for your Dental Associate recruitment needs. Call 1-866-409-3001 today to learn more about improving your opportunities or success. See our ad on the back cover.

Henry Schein Professional Practice Transitions (PPT) is the practice sales division of Henry Schein, Inc. Our affiliation with the largest dental supply company in the country—intent on servicing the practice buyer’s future supply, equipment and service needs, makes PPT the only company with a vested interest in the buyer and a career long trusted relationship with the seller. (Please see our ad on the inside back cover.)

MacPractice, Inc (402) 420-2430 MacPractice.com MacPractice DDS is the leading practice management and clinical application for dentists who prefer to use a Mac, featuring electronic insurance submission, Mac native digital radiography and photos, charting, Electronic Dental Records, Kiosk, Web Interface, iPhone Interface, speech dictation, and Mac stability and ease of use. Please see our ad on page 27.

Since 1984 thousands of dental professionals have discovered Oxyfresh’s safe and effective oral health products for use in long-term care and maintenance of their patients. Retail sales, wholesale rebates and “free product” programs allow you to get paid appropriately for providing professional guidance and instruction to your patients.

Offices located Nationwide. PARAGON offers professional consultation and related services to healthcare professions with primary emphasis on the dental profession: comprehensive dental practice valuations (including a written valuation and analysis report); practice sales; pre-retirement sales; practice acquisitions; practice mergers; associateships; partnerships; practice consolidations and practice management. References available by request. Please see our ad on page 29.

Patterson Dental Supply Inc. is a full-service distributor of a complete range of dental products and services to dentists, dental laboratories, institutions and other healthcare providers throughout North America. As one of the nation’s largest dental distributors, Patterson Dental sells consumable dental supplies, digital and other dental equipment and practice management software. Please see our advertisement on the inside of the front cover and page 1, and page 21.

Patterson Dental, a leading distributor of dental products, equipment and technology in North America, is the largest business in the progressive, global Patterson Companies family of businesses. Dental professionals who partner with Patterson enjoy the convenience and assurance of relying on one trusted source for everything they need. Please see our ad on page 31.

CEREC AC from Sirona is the most advanced dental CAD/ CAM system available. With its Bluecam, capturing fast, precise digital impressions and then creating high quality esthetic restorations is a reality. CEREC AC delivers access to efficient, precise, scalable and affordable solutions, including CEREC Connect. Call 1-800-659-5977 or visit www.cereconline.com. Please see our ad on page 29.

The Artist Evolution is a full service, strategic marketing and design firm with a passion for helping practices around the country to communicate effectively with their target patients, to develop an identifiable brand, and to meet their objectives in a cost-effective way. Please see our ad on page 25.

Wells Fargo Practice Finance provides customized financing supported by experienced specialists and practical planning resources to help dentists acquire, start and expand their practices. The only practice lender selected especially for ADA® members and endorsed by ADA Business ResourcesSM, we understand the business of growing successful practices and are here to help you achieve your goals. Please see our ad on page 7.

lender. A number of experienced lenders specialize in lending to dental school graduates and to dentists in general. The graduate should retain an experienced financial dental advisor, such as a dental CPA, and use that person’s guidance to find these dental specialty lenders, avoiding the heartache of being turned down by the local bank. Every attempt at borrowing and credit score request can hurt the graduate’s credit standing, so it is important to be selective with whom the credit applications are going.

Are Savings Important to the Graduate?

One may wonder how this question even occurs. How can there be savings when there is so much borrowing, the need to pay standard living expenses, such as rent and food, and possibly a car payment as well? Some graduates do their best to save however much they can. They do this at the expense of high credit card debt and live in a miserly fashion in order to have money in the bank. They may think this assists them when they apply for credit. They have high interest rate charges on their credit cards because they are paying the minimum balance to keep the credit card current and increasing the amount they owe since they are paying little against the loan balance. This is a poor method of helping oneself.

Think about what the graduate is earning on the savings account, possibly one

half of one percent. Compare that to the interest rate being paid on the credit card, which is probably upwards of 10 percent. It’s beneficial to pay off the credit card as quickly as possible and have less in the bank being saved other than amounts deemed necessary for emergencies, as far as what a lender thinks. The savings will come with the job that the graduate obtains. Most reasonably-successful dental practices have retirement plans that contribute on behalf of the employee and allow the associate to accumulate savings that help reduce income tax liability, as well as save for the future. There is plenty of time for savings as the graduate’s career progresses. The credit score for the graduate plays the most prominent role in financial success. ■

Please reach out to our authors

and our advertisers. They care about you and keep us in print!

Bruce Bryen is a CPA with over forty years

of experience. He is the Managing Partner of his accounting firm, Bryen & Bryen LLP, based in southern New Jersey.

Mr. Bryen specializes in deferred compensation, such as retirement planning design; income and estate tax planning; asset protection and structuring loan packages for presentation to financial institutions.

If you have any questions,

comments, or responses to

Mr. Bryen is experienced in providing litigation support services to dentists with expert witness testimony in matrimonial disputes cases. You may contact Bruce Bryen at 856985-8550, extension 112.

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