The DSO One Loan Program

This program is designed to facilitate bank – supported rapid growth for emerging dental groups and DSOs. If your organization is committed to investing in yourself and committed to best practices across all aspects of practice operations, then this program is for you.

Our more than 30 years of experience guiding dentists and DSOs through the lending process has provided an extensive understanding of the dental lending landscape. We know the players. We know the process. Our bona fide formula will afford your organization unrestricted growth and expansion. Wouldn’t you want to know the answer before you apply for financing? It is all possible. The choice is yours.

Why do banks say no!

The primary reason banks give for declining to support rapid growth for dental groups and DSOs is fear of a “too fast- too soon” mentality. The question may be does the operation have the management infrastructure to effectively support the expansion. Banks do not want to be in the position of finding out the organization cannot support growth once the loan(s) have been made.

Banks are conservative by nature. It is easier to err on the side of caution. Many have Risk Assessment Criteria that prohibits rapid growth for dental funding platforms. Some will not even openly admit they will not support multiple dental location funding. They make a loan, and it has a 5-year prepayment penalty, the dental group then learns that the bank now controls their destiny. The other option is pay a large prepayment penalty to find a better lending partner.

How Great would it be?

What if you could assure an Approval before you applied? There are definitive steps that can demonstrate to any lender that your organization IS ready to support rapid growth and more importantly deserves it.

It falls into 3 primary categories. The first is the financial performance of every office you own. Next, the sophistication of your financial reporting. Are you currently compliant with existing loan covenants? Lastly, the managements’ ability to effectively support the operation. If your numbers are where they should be, and you are maximizing the utilization of your offices, that demonstrates sound management support. There are secondary factors as well, but these are the primary factors you should be concerned with.

Just meeting the minimum standards will not cut it and will not be sufficient to instill lender confidence to fund rapid growth. One must excel in all areas to remove the specter of doubt from any credit committee considering your application.

Office Level Performance

Traditional Loan Covenants will require maintaining as 1.25 times Debt Service Coverage. Basically, this means you generate at least $1.25 for every dollar you owe. As the amount of debt increases, the requirement may be raised to 1.35 to 1.5 times Debt Service Coverage. Remember, these are the minimum requirements. Be prepared to produce superior performance financially if you are going to demonstrate that your team is prepared for rapid growth.

Financial Reporting

As an operation grows, and the debt level increases, the sophistication and requirements of financial reporting will increase. Are you on Accrual Basis or Cash Basis? When loan amounts get into the millions, banks will require CPA prepared or reviewed financial statements. As loans increase into the tens of millions, audited financial statements will be required. Begin with an end in mind. If the trajectory is rapid growth, start out with a CPA firm that specializes in not only dental, but DSO clients. A CPA firm that will commit to meeting loan required reporting.

Choosing the Right Lender

There are many considerations in choosing the right lender for your dental operation. Unfortunately, most decision makers will only focus on lenders’ interest rate. There are far more important factors to consider for a dental group. It is a fact that the more aggressive a lender is on interest rates the less flexible their Risk Assessment Criteria is for rapid expansion of an emerging dental group or DSO. It only stands to reason that a lender must factor in the margin for potential losses when they are willing to extend terms that allow for expanded credit risk.

We have dealt with far too many organizations looking for a workaround when expansion opportunity hits a wall with a lender that wants to dictate growth. The choice? Pay a large prepayment penalty, or don’t grow. The idea of finding a different lender to finance the new opportunity will be even more problematic The existing lender has prevented this option with loan covenants such as “No Additional Debt Without Prior Written Approval.”

Our Program is Designed to remove limitations.

If your organization is interested in rapid growth and using bank loans to do it, you need DSO One Loan. Taking you through all aspects of what it takes to keep growing without the standard limitations is what we do. Once we learn what your stated trajectory is, we will work with your team to get you there. We are not fitting you “into the box”. We design the Box that fits you!

Why give up EQUITY at this stage?

The notion that securing a sponsor or Private Equity is the only way to facilitate rapid growth is incorrect. If you do not want to reinvest in your organization, or getting things in order across all aspects of your operation seems like too much effort, then the sponsor or PE model is your best option.

If you want to retain control of your destiny and are willing to commit to what it takes, This Is The Program To Get You There!

Unrivaled Support Across the DSO Spectrum

Our seasoned team of experts are poised to assist in every aspect of facilitating rapid growth for scaling DSOs and Emerging Dental Groups. Whether you have hundreds of offices or are just getting started, we have the support required across the entire financial and operational spectrum.

Maybe you feel you have all the bases covered. Our experience has proven that there are always gaps and opportunities to be addressed.

Let our team of proven experts offer a free consultation and provide the piece of mind you deserve for your operation.

If you are committed to success. If you are ready to invest in the expedited growth of your organization. If you want to retain equity in your dental operation, yet have unlimited growth potential, Call us TODAY! The results can be life changing.

Call Today and begin the journey that will reshape your future.

551-202-9944

When a bank is considering lending to a dental group with rapid expansion plans, several key factors come into play. These factors help the bank assess the risk and potential return on investment. Here are the top 10 considerations:

Financial Health and Stability:

Current Financial Statements: Detailed and accurate financial statements, including balance sheets, income statements, and cash flow statements.

Profitability: Consistent profit margins and evidence of a sustainable business model.

Creditworthiness:

Credit History: The dental group’s credit score and history of repaying previous loans.

Debt Levels: Existing debt and debt-to-equity ratio to assess how much more debt the business can handle.

Business Plan:

Expansion Strategy: A well-defined and realistic expansion plan, including projected costs, timelines, and expected returns.

Market Analysis: Understanding of the market demand and competitive landscape.

Management Team:

Experience and Expertise: The qualifications and experience of the management team, particularly in scaling businesses.

Track Record: Previous success in managing and expanding dental practices.

Cash Flow Projections:

Revenue Forecasts: Projections of future revenues, including assumptions and supporting data.

Expense Management: Expected operating expenses and plans for managing costs during expansion.

Collateral:

Assets: Availability of assets that can be used as collateral for the loan, such as real estate, equipment, or receivables.

Valuation: Accurate valuation of collateral to determine the loan-to-value ratio.

Industry Conditions:

Regulatory Environment: Current and potential regulatory issues affecting the dental industry.

Economic Factors: General economic conditions that could impact the dental sector and the group’s expansion plans.

Market Position:

Brand Strength: The dental group’s reputation and brand strength in the market.

Patient Base: Size and loyalty of the existing patient base and potential for growth.

Risk Management:

Insurance Coverage: Adequate insurance coverage to protect against potential risks.

Contingency Plans: Plans in place to mitigate risks associated with rapid expansion, such as operational disruptions or market changes.

Legal and Compliance:

Legal Structure: The legal structure of the dental group and any potential legal issues.

Compliance: Adherence to industry regulations and standards.

By thoroughly evaluating these factors, a bank can make a more informed decision on whether to lend to a dental group with rapid expansion plans, ensuring that the loan is both secure and beneficial for both parties.

Call Today and begin the journey that will reshape your future.

551-202-9944

Banks lending to expanding dental groups will impose covenants to safeguard their investment and ensure the borrower’s financial health. Here are the top 5 lending covenants usually required:

Financial Covenants:

Debt Service Coverage Ratio (DSCR): The dental group must maintain a minimum DSCR, generally above 1.25x, to ensure they generate enough cash flow to cover their debt payments.

Leverage Ratio: Limits are set on the debt-to-equity ratio, keeping it below a certain threshold, such as 3:1, to prevent excessive borrowing relative to equity.

Operational Covenants:

Cash Flow Sweeps: This requires the dental group to use a portion of excess cash flow to prepay the loan, reducing the principal more quickly and lowering the bank’s risk.

CapEx Limits: Restrictions on capital expenditures without the bank’s approval ensure that expansion plans don’t compromise financial stability.

Reporting Covenants:

Regular Financial Reporting: The dental group must provide periodic financial statements (e.g., quarterly and annual reports) and other relevant operational data to the bank, ensuring transparency and enabling the bank to monitor financial health and performance.

Restrictive Covenants:

Restrictions on Additional Debt: Limits on incurring additional debt without the lender’s consent prevent over-leverage and ensure the bank retains its priority in case of default.

Restrictions on Dividends and Distributions: Limits on dividends or distributions ensure that profits are reinvested in the business or used to service debt.

Performance Covenants:

Minimum EBITDA: The dental group must maintain a minimum level of Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) to ensure profitability and debt coverage.

Patient Volume Targets: The group must meet targets for maintaining or growing patient volumes to ensure a stable and expanding revenue base.

These covenants help banks manage risk by ensuring the dental group remains financially disciplined and focused on maintaining its financial health during rapid expansion. If an organization intends to grow in an expedited manner, they will have to substantially exceed the minimum lending covenants imposed by their lender. By exceeding the minimum standards, it demonstrates an organization has management, staff, policies and procedures required to operate the organization efficiently and successfully.

We often say, create the ideal prototype you wish to duplicate then seek to scale a DSO or group from there.

Call Today and begin the journey that will reshape your future.

551-202-9944