Dental Office Feasibility Study in California

The largest dental market, with larger loans

California ranks 1 of 54 in SBA dental lending: 1,652 loans approved from FY2017 to FY2026, totalling $1.53 billion. Dental offices rank 3 of 39 classes within the state, and a location quotient of 1.53x shows the class takes a much larger share of California's SBA lending than it does nationally. What sets this cell apart, from California's all-asset SBA book and from dental lending nationwide alike, is loan size: a median of $627,000, 1.24x the national dental median, with the middle half between $283,875 and $1.2 million.

A loan of that size can buy an established practice, fund a full build-out with equipment, or carry a practice together with its building. The program mix supports all of those readings: SBA 7(a) carried 1,264 loans and SBA 504 carried 388. Franchises are almost absent at 0.12%. Approvals peaked at 266 in FY2021, carrying $324.1 million, and stood at 154 in FY2026.

Lenders and a record of low loss

Live Oak Banking Company is the current holder of 211 of the 7(a) loans, worth $373.7 million, well ahead of U.S. Bank, National Association with 130 and Wells Fargo Bank National Association with 124. On the 504 side the work is shared among Business Finance Capital with 63 loans, CDC Small Business Finance Corp. with 60, and California Statewide Certified Development Corporation and Bay Area Employment Development Company with 57 each. For a borrower that means real choice among lenders for the same practice; for a lender it means a crowded field for a credit many competitors already know well.

That credit has performed. California dental loans funded in FY2017 through FY2021 number 831, and charge-offs among them stand at a floor of 1.2%, with 0.84% inside five years. The weak point is getting to closing: California dental approvals in the FY2017 through FY2024 window were cancelled at a floor of 13.2%, with a ceiling of 14.7%. A practice sale that falls apart over price, the lease or the seller's transition terms would show up here.

What a California dental study must show

A study for a dental practice here is mostly a test of the practice being bought or built. Demand means the patient base, the payer mix and the number of competing dentists near the site, in a file where Los Angeles, Orange, San Diego and Santa Clara counties hold 454, 200, 167 and 94 of the approvals. Cost covers equipment, build-out and any goodwill in the price. Coverage should rest on collections the selling dentist can document, after the buyer's own compensation, and the appraisal must separate goodwill from tangible assets and real estate, since a lender relies on each in a different way.