SBA 7(a) Dental Office Feasibility Study in Texas

Second place in the country, almost no franchising

Only one state approves more SBA 7(a) dental office loans than Texas, which ranks 2 by count. Texas dentists received 720 loans from the program between FY2017 and FY2026, worth $662.2 million in gross dollars, and dental offices rank 10 of 39 among Texas asset classes. The median loan of $547,500 is 1.11x the national median, with half of the loans between $220,000 and $1.2 million. The metric that distinguishes the cell is the charge-off record, standing at 3.0% to date.

Outcomes

Of the 362 loans that funded from FY2017 to FY2021, 3.0% are charged off so far and 1.7% were charged off by the fifth year. Neither number is final, because open loans can still fail. Cancellation after approval was at least 12.3% for FY2017 to FY2024 approvals, and counting undisbursed loans as cancelled leaves it at 12.3%. So far, then, funded loans in the class have held up comparatively well, though that is a reading of floors.

Independent practices

A franchise stands behind only 0.42% of the loans, so these are mostly independent practices. Live Oak Banking Company is the biggest holder, with 103 loans and $190.1 million, a high dollar amount for each loan. United Community Bank holds 58 worth $62.2 million, The Huntington National Bank 50 worth $44.0 million, Wells Fargo Bank National Association 48 worth $32.9 million, and PNC Bank, National Association 38 worth $30.8 million. SBA lists the current holder, not the policy of the bank. Harris County has 114 loans, Dallas 90, Collin 61, Tarrant 51 and Bexar 49. Volume fell to 45 in FY2023 and rose to 81 by FY2026.

What a Texas dental study should prove

Because 7(a) is a general-purpose guarantee, the study begins by saying whether the money buys a practice, builds a new suite or pays for equipment. For an acquisition, it should test patient retention once the seller leaves, production per chair and the price paid against collections. A start-up needs the patient base in the trade area, the dentists already there, and the mix between insurance networks and fee-for-service. Equipment and build-out are costly, so they should be set against a median of $547,500 and an upper quartile that reaches $1.2 million. Show the payment covered through a slow first year of patient growth. The appraiser will value the practice on adjusted earnings, so the study should explain how they were adjusted.