What Is Seller Financing in a Dental Practice Sale?
In a traditional dental practice sale, the buyer typically secures a loan from a third-party lender—often a dental-specific bank—to cover the full purchase price. But sometimes, that’s not possible or ideal. That’s where seller financing comes in.
- Seller financing means the seller agrees to finance a portion of the purchase price, allowing the buyer to make payments over time—usually with interest—directly to the seller.
Think of it like the seller becoming the bank for part of the deal.
Why Would a Seller Offer Financing?
Offering seller financing may not be your first thought, but in certain scenarios, it can be a smart strategy. It can:
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Attract more buyers, especially if traditional lenders are tightening credit.
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Speed up the sale by removing financing delays.
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Preserve your asking price when a buyer has limited capital but strong potential.
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Generate interest income on the financed portion.
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Demonstrate confidence in the practice’s performance to the buyer.
In short: Seller financing can help get the deal done—and done on your terms.
When Does Seller Financing Make Sense?
Here are common scenarios where seller financing is worth considering:
1. Buyers with Great Potential but Limited Capital
Some associate dentists have the clinical skills and leadership potential to succeed—but lack a large down payment. If they’re creditworthy and committed, seller financing may help bridge the gap.
2. A Difficult Lending Environment
If interest rates rise or lenders become more risk-averse, even qualified buyers may struggle to secure full funding. Seller financing can keep the deal alive.
3. A Unique Practice or Challenging Location
If your practice is rural, highly specialized, or has quirks that make lenders nervous, seller financing can make it more marketable without slashing the price.
4. You’re Not in a Rush for a Full Payout
If you’re financially stable and don’t need all the funds upfront, offering a note can provide steady income—with interest.
How Is Seller Financing Typically Structured?
Seller notes are usually:
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Term: 3 to 7 years
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Interest rate: Often between 6%–9%, depending on the market
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Monthly payments: Principal + interest (like a traditional loan)
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Security: The buyer pledges the practice assets as collateral
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Down payment: Still required, typically from a bank loan or cash
A broker or attorney can help you structure the deal to protect both parties.
How Sellers Can Protect Themselves
While seller financing carries some risk, there are ways to safeguard your interests:
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Run a full credit check on the buyer
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Request a personal guarantee
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Secure the note with a UCC filing
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Include default provisions and rights to reclaim ownership if needed
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Work with a dental-specific attorney to draft ironclad terms
Pro tip: Always vet the buyer just like a bank would. If you wouldn’t lend them $300,000 personally, don’t do it as part of your transition.
When NOT to Offer Seller Financing
Seller financing isn’t right for every deal. It may not be a good fit if:
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You need full payment at closing for retirement or another purchase
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You’re uncomfortable with risk
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The buyer has a weak financial history or limited clinical experience
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The practice already has cash flow issues
Always speak with your financial advisor or broker to weigh the pros and cons in your specific situation.
Final Thoughts: Seller Financing Is a Tool, Not a Compromise
Offering seller financing doesn’t mean you’re “settling.” It can be a strategic tool to help you:
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Attract a motivated buyer
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Close faster
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Preserve your asking price
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Generate interest income post-sale
In today’s market, flexibility can go a long way—especially when paired with the right protections.
Need Help Structuring a Dental Transition?
At American Practice Consultants, we help sellers understand all their options—from traditional sales to hybrid deals with seller financing. If you’re thinking about selling and want to explore what makes sense in today’s market, we’re here to guide you.