Access To Capital for Dental Practices and Small to Medium Sized Businesses

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In 2025, Access to Capital Will Improve Through Alternative Sources

It has been a challenging time for commercial lending in the past couple of years. When rates go up and the economy contracts or becomes unstable, lenders will adjust their lending strategy and activity. This results in less capital available for lending in the market. And recently, traditional lenders (banks) have been challenged with a shrinking deposit base which impacts lending capital availability. This is particularly true for smaller banks. As a result, many banks have focused on strengthening their deposit activity on their balance sheets and lending has taken a softer focus. Or lenders have to lean into transactions with attachment to real estate to make the deal more acceptable for an internal credit committee.

This environment has impacted a dental practice’s access to capital.  The lending environment has contracted. The increase in the federal funds rate and the unstable or flat economic environment has compounded the situation over the past couple of years.   Rates will always be the primary driver for lending activity.   High rates will suppress lending as the lender’s cost of goods increases.

Since the end of the pandemic, the fed interest rate increased from a near zero rate during the pandemic to a sustained effective rate of 5.33% from September 2023 to September 2024.   Only recently did the rate decline to near 5% with a policy change by the Fed.  This is welcome news for SMBs and dental practices. This means that the lending environment is realizing some relief from the past year and half in which lenders contracted their lending. However, many small businesses still do not share a very optimistic view of access to capital.  In a recent survey of 14,000 SMBs compiled by Lendio, 23% of businesses surveyed rated access to capital as very poor and do not expect much change in 2025.  Many SMBS and dental practices are incurring challenges in the process of receiving a timely decision on the lending request.

Current Influx of Emerging Dental Technologies will Drive Need for Financing Solutions

Access to capital is imperative for a dental practice to be able to be nimble and invest in new technology.   The industry has noted a surge in new technology. With advancements in AI, technology is ever changing. New and advancing technology coming into the market includes new implant systems, intraoral cameras, 3D printers, Cam technology, implant systems, and smile design systems.   Most technology adds additional features to leverage AI technology. The ability for a practice to financially plan and invest in new dental technology is imperative for 2025.

Quick Access to Capital Can Accelerate the Benefits of Available Technology

As traditional lenders continue to focus on deposits, access to lending capital may still be a challenge in 2025 despite a lower interest rate environment. In addition, another challenge with traditional lenders is that they tend to have long processing times. This can cause delays for the dental practice to employ emerging technology. The impact to production can be significant.   For example, new laser technology for hygiene can reduce hygiene appointments down to 10-15 mins per session (from a typical hour).  This means that a practice can increase hygiene production from 1 patient per hour to 2 or 3.

The impact on production is tremendous over a month of production.   If the lending institution takes too long to decision a simple equipment purchase, then the impact to the practice is significant. A faster solution is needed. There are many alternate solutions (such as TuaCommercial) that have decision turnaround times with a personal guarantee as soon as the same day.  For deals that require extended documentation, the decision can be still within a few days. In addition, alternative lenders can have access to a myriad of lending solutions which can be broader and provide a wider lending pool than traditional lenders (banks).

Conclusion

In 2025, practices will continue to face the combined headwinds of increased supply chain costs, staffing challenges, and a high-interest rate environment. It will be a challenge for a practice to be nimble and capitalize on the newest technology or other investment the practice needs to make to grow in 2025 and expand profit margins. The dental practice should explore a lender that has broad access to capital and can offer quick decisions supported by exceptional service.  This focus on ensuring access to capital as needed will make the dental practice more competitive in 2025.

Learn about how  TuaCommercial can help
DSOs and dental practices get access to fast lending solutions in 2025.