Build Your Dream Practice Today

Author : Dental Product Shopper
Published Date 04/09/2009
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Recent economic news may have you battening down the hatches and delaying needed equipment purchases and office renovations. But there?s other news that you may not have heard: money is available for dentists with good credit and solid cash flow. That means it?s entirely possible to add an operatory or purchase that digital radiography or CAD/CAM system you?ve had your eye on. With interest rates at 40-year lows, it may even be time to open a new practice (See our On-line Exclusive ?It?s Easy to be Green: How 3 Chicago Dentists Built a New Practice in an Uncertain Economy? at www.dentalproductshopper.com/practicebuilding). Your dental practice is your biggest investment, and the dollars you invest today will add to your practice?s growth and future stability.

Build Your Dream Practice Today

Recent economic news may have you battening down the hatches and delaying needed equipment purchases and office renovations. But there?s other news that you may not have heard: money is available for dentists with good credit and solid cash flow. That means it?s entirely possible to add an operatory or purchase that digital radiography or CAD/CAM system you?ve had your eye on. With interest rates at 40-year lows, it may even be time to open a new practice (See our On-line Exclusive ?It?s Easy to be Green: How 3 Chicago Dentists Built a New Practice in an Uncertain Economy? at www.dentalproductshopper.com/practicebuilding). Your dental practice is your biggest investment, and the dollars you invest today will add to your practice?s growth and future stability.

Invest Now for Your Practice?s Future

One of the critical ways to ensure future growth for your practice is through investment in improved technology. The modern dental practice continues to evolve at a rapid pace. Systems that were used in the past may now be obsolete and must be replaced by solutions that allow your practice to run more efficiently. For example, digital imaging in many practices is replacing older film-based systems. This is just one example of the ever-changing technology that your practice needs to stay on the cutting edge.

Purchasing new equipment for your practice now is an important way to not only keep pace with technology, but also to spend dollars that will give you a return on your investment. In the competitive dental environment, retaining existing patients and attracting new ones becomes a vital part of your office operations. By keeping up with technology and offering your patients stateof- the-art dentistry, you develop and retain the patient base you need to ensure the success of your practice.

Purchase, Lease, Finance: The Choice Is Yours

Dentists have 3 options to choose from when adding new equipment or making renovations to their practices: outright purchase, lease, or financing. The primary factor to consider with any of these options is cash flow.

Making an outright purchase requires a higher initial outlay of cash. In addition, this option may not be feasible if you do not have significant cash flow available. Leasing typically requires less cash down, allowing for more working capital for your business.

The third option is to apply for a bank loan or financing. Most banks and finance agents have certain requirements necessary to obtain financing (see Checklist on this page). As discussed previously, cash flow is critical. While many dental specialty lenders offer 100% financing, local banks may ask for a 10% to 20% down payment.

Credit scores also have become increasingly important in today?s market. A solid credit score will not only help you avoid additional bank fees, but will also greatly improve your chances for approval of a loan. Find out your credit score well before applying for a loan.If your score is low (below 620), make sure it?s accurate. If it isn?t, get it corrected to reflect your true credit standing. If it is accurate, do the work necessary to bring the score up so that you?re on sound financial footing to get a loan.

Some financial institutions are closely reviewing the collateral your practice has available as well as your ability to repay current debts as they become due. Many lenders have established new financing requirements, and they can vary substantially by lender. To avoid confusion and increase your chances of getting your loan, check with multiple lenders to compare and contrast their requirements.

Tax Benefits: Equipment Purchasing Incentives

Another factor that will play a role in your decision to buy, lease, or finance equipment is the tax ramifications. One of the most important benefits of buying equipment outright is tax deductibility. Under Internal Revenue Code Section 179, taxpayers may elect to deduct the cost of a piece of equipment in 1 year, rather than be subject to the regular depreciation methods allowed by the IRS. For 2009, a taxpayer can deduct up to $250,000 of the cost of equipment (subject to a phase-out if you place more than $800,000 of equipment in service in any 1 year). The expense election is also limited by the aggregate amount of taxable income of the taxpayer for the tax year.

If you meet the eligibility requirements, the resulting reduction in your tax burden could be enough to sway your decision to buy. It is also important to note that any principal payments toward a bank or equipment loan are not considered a tax deduction; the deduction is limited to interest payments only. Leasing also allows for a tax deduction. The monthly payments toward an operating lease can typically be deducted as a business expense on your tax return.

Bottom line: talk to your accountant first to ensure you?re making the right purchasing decision for your practice.

Good News

The good news is that you don?t have to delay creating the practice of your dreams. Today?s economy should not be a reason for you to stop investing in your practice. There are many options and many lenders willing to compete for your business. Talk to your accountant or financial advisor to help evaluate your options and assist you in making an informed decision. ?Deborah M. Cordivari

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