Stable Industries, No. 3: Dental Practices

Where SBA loans fail less often, one industry at a time. A series for acquisition entrepreneurs, built on SBA 7(a) loan-level data. Read No. 1: Veterinary Practices and No. 2: Gas Stations. Data in partnership with Ink.

FY2007 was the worst year to make an SBA loan in 25 years of data. Loans disbursed that year went straight into the financial crisis, and 27.5% of them defaulted within three years.

For dental practices, the same year's figure was 9.5%.

That gap is the story of this issue. Across the 2001–2012 vintages, dental loans consistently defaulted far less often than the wider SBA book—even during the financial crisis. Gas stations' credit record improved markedly in the 2010s. Dentistry's advantage shows up much earlier.

Two other findings matter to buyers. Loan size has shown almost no relationship with ten-year dental defaults: the smallest and largest loan groups landed near 5%. And dental defaults tend to arrive late: 42% of defaults observed within ten years occurred in years six through ten, versus 26% across SBA 7(a).

But the history isn't unbroken. Annual dental defaults have climbed since FY2023, especially among newer loans. And for non-dentist buyers, there's a bigger catch: this may not be the business model you can legally buy.

Every issue opens with the same four figures, so industries can be compared as the Playbook grows. FY2026 is partial, running through April 2026.

The annual rates are the share of outstanding loans that default in a year. The ten-year rate follows a group of loans for a full decade. Neither is a business-failure rate. A default means SBA's records show the loan going into liquidation, SBA paying out on its guarantee, or a charge-off, whichever came first.

Of the practice types we compared, only vets have a cleaner ten-year record.

The vet figure is on the current loan tape. No. 1 printed 4.00% on an earlier pull.

The loan tape doesn't explain the resilience. Patient demand is one plausible contributor. According to CMS expenditure data, national dental spending edged up 0.6% in 2009, in the depths of the recession. Dental care isn't fully recession-proof—spending fell during the 2020 shutdowns—but the historical record suggests it has been more durable than many other categories.

Across the SBA program, small loans default more than large ones. That was true for gas stations in No. 2, where loans under $150,000 defaulted at 13.22% over ten years and loans of $1 million or more at 4.61%. Dental practices don't follow the pattern.

Across these ten-year cohorts, dental loans under $150,000 defaulted at 5.16%; loans above $1 million, at 5.72%. That's unusually flat compared with the SBA book. Loan size alone isn't a useful shortcut for assessing a dental practice. The data can't tell us whether the driver is licensing, borrower selection, underwriting, or practice economics.

Dentistry is heavily owner-operated. The ADA Health Policy Institute reported that 73% of dentists owned their practice in 2023. The median general-dentist owner billed $893,510 and netted $199,140 in 2025, according to the ADA practice data. These are dentist economics, not a passive investor's returns.

State professional-ownership rules limit who can control a dental practice, and the clinical license is central to how the business runs. That may contribute to lender selection and repayment performance, but the SBA loan tape doesn't identify the owner's license or isolate its causal effect. Recent dental borrowers reported a median of five to six employees, versus four across the SBA program.

The median dental loan approved in FY2025 priced at prime + 1.25 points, against prime + 2.75 for the program. That puts dentists between vets (prime + 0.67 in No. 1) and gas stations (prime + 1.75 in No. 2). On loans of $350,000 and up, dentists price like vets: prime + 0.20, against prime + 0.16 for vets and prime + 2.00 for comparable SBA loans. In FY2024, the median large dental loan was priced at prime itself.

Most SBA dental lending isn't for acquisitions. In FY2023–FY2025, 117 loans were marked as changes of ownership—about 7% of dental loans with known business age. Over the same period, SBA financed 291 dental startups. That's a useful distinction for searchers: the industry's overall repayment record is built mostly on loans to businesses that weren't just acquired.

The acquisitions that do happen are mid-sized. The median dental acquisition loan was $689,000 in FY2025 and $913,500 in FY2023. Only about a fifth carried a 25-year term, so most buyers aren't financing the building.

Three-year rates follow loans disbursed through April 2023 for a full three years.

Three of 300 dental acquisition loans defaulted within three years: 1.00%, against 4.00% across SBA acquisitions. That's encouraging, but 300 loans are too few to rank dental acquisitions confidently against the other industries in this series. The approximate 95% interval around that 1.00% estimate is 0.34%–2.90%. The direction is compelling; the precision is not.

More recent signals are less comfortable. The FY2025 annual default rate for dental acquisitions was 3.03%, close to 3.30% for SBA acquisitions overall. And 3.65% of live dental-acquisition loans had gone three months without a recorded payment, similar to 3.68% across acquisition loans. Neither measure overturns the older three-year result, but neither supports treating dentistry as a free pass.

Don't read the startup row as "de novo practices are safest." Many startups spend part of the three-year window in deferment, before payments are fully due, so a three-year window flatters them.

SBA approved 697 dental loans worth $680.7 million in FY2025, the most since FY2021. That's a partial recovery: in the early 2010s, the program wrote 815 to 1,159 dental loans a year.

The loans have grown. The median dental loan was $300,000 in FY2010 and $500,000 in FY2025, and 30% of FY2025 dental loans were $1 million or more, against 9% in FY2010. The program's median FY2025 loan was $187,000. Standard 7(a) dental loans in FY2023 through FY2025 had a median of $715,000; SBA Express loans had a median of $100,000.

The market is national. California held 16% of recent dental loans, Florida 10%, Texas 9% and New York 6%, a much less concentrated map than gas stations. Acquisition lending is concentrated by lender: 41 lenders wrote the 117 recent acquisitions, and three of them wrote more than half.

FY2026 is the highest rate of the decade for dentists, though still under half the program's. The recent rate is 1.36x its pre-pandemic level (95% interval 1.11 to 1.66), close to vets (1.31x) and a little below the program (1.47x).

Where it's coming from:

It isn't one state or one lender. The 114 recent defaults are spread across 29 states and 44 lenders, and without Texas, FY2026 is still 1.99%. Twenty-three more defaults dated May through July 2026 are on the tape but not counted, because SBA revises its latest records.

The ADA's Q3 2026 economic report shows the pressure:

Medicaid adds policy risk for practices that rely on it. Federal Medicaid funding is set to fall under the 2025 budget law, and adult dental benefits are optional for states. California, for example, delayed a planned Medi-Cal dental reduction to July 2027. The relevant diligence is the target's actual payer exposure—not the national budget number.

Debt-heavy consolidators have had their own stress. Dental Care Alliance restructured more than $1.1 billion of debt in April 2026. That's a warning about leverage, not evidence that an independently financed dental office is failing in the same way. Buyers should separate practice-level operating cash flow from debt and acquisition premiums layered on by a larger group.

In No. 1, vet defaults clustered in year three. In No. 2, gas station defaults followed the program's usual timing. Dental defaults come later.

Shares are of defaults that occurred, not the odds of default for a loan surviving to each year. They don't sum to 100% because of rounding.

The median dental default came 54 months after disbursement, against 40 for vets and 39 for gas stations.

Why so late? The SBA tape can't tell us. It doesn't record provider departures, disability, planned sales, or failed succession plans. Those are plausible mechanisms, especially in a practice dependent on one producing dentist, but the timing data do not prove them. And these are shares of defaults, not year-by-year default probabilities for loans still outstanding.

One limit on that reading for buyers. The timing pattern comes from all dental loans disbursed in 2010 to early 2016, before SBA marked acquisitions. The three dental acquisition defaults we can see all came in the first two years, too few to say whether buyers fail differently.

When dental loans do fail, the losses are a little lighter. Forty-three percent of defaulted dental loans were later paid in full, against 37% across the program. Among loans that were charged off, the median loss was 67% of the original principal, against 74%. Lighter isn't light. A charged-off loan still lands on the guarantor.

Most EBIT readers aren't licensed dentists. That's a material distinction. The historical default rates are for loans coded as dental offices, not a verified sample of dentist-owned practices or non-dentist investors. Most states restrict who may own or control professional dental entities, and California tightened limits on private-equity influence over clinical decisions in 2026. You can't assume the attractive SBA numbers carry over to a structure you use as a non-dentist.

A non-dentist investor may participate through a management services organization (MSO), with a dentist owning the professional practice and the investor providing permitted non-clinical services. But an MSO earns management fees, not necessarily the practice's clinical profit, and its regulatory and financing risks are different. It may not appear under NAICS 621210 at all. Before an LOI, establish what entity you could own, how cash reaches it, and who controls clinical decisions.

Build a plan for the dentist leaving. Underwrite production by provider, the seller's realistic transition, associate retention and the ability to operate if the lead dentist can't work for six months. Ask the lender about key-person or life coverage and any required collateral assignment. The loan's late-default pattern makes succession worth planning early; it doesn't establish that retirement causes default.

Map who produces the revenue. Break production out by provider. If the seller produces most of it and is leaving, what you're buying is the patient base and the hygiene schedule, not the seller's chair. Keep the seller on through a real transition. Plan for hygienist retention too: it's one of the hardest hires in dentistry right now.

Know the payer mix before the multiple. Across general practices, the ADA puts the mix at about 50% private insurance, 40% patients directly and 7% government programs. Pull the target's split by fee-for-service, each PPO network and Medicaid. A practice that leans on one insurer's fee schedule, or on state Medicaid, is exposed to decisions it doesn't control.

Price the location, not a rule of thumb. Henry Schein's practice-transitions team calls the old "60 to 65% of revenue" rule unreliable, citing roughly 50% of a year's revenue in rural markets, 70 to 75% in the Northeast and up to 100% in Los Angeles. That's a practitioner's view, not a survey, and exit multiples are softening. Value the practice on normalized, dentist-adjusted cash flow.

Run debt service against the practice's actual cash flow. A $689,000 ten-year loan at 8.88% costs roughly $104,000 annually in principal and interest. At $825,000, it's about $125,000. Those are illustrations, not underwriting approvals. Don't subtract these figures mechanically from the ADA's median dentist-owner income: the survey and SBA cohorts aren't the same businesses, and income definitions differ. Normalize provider pay, overhead and working capital in the SBA loan calculator.

Shop the rate. Dental acquisitions priced at prime + 1.25 in FY2025, against prime + 2.00 across SBA acquisitions. Three-quarters of a point on a $689,000 loan is about $5,000 of interest in the first year. And the median dental loan of $350,000 or more priced at prime + 0.20, so tight pricing is available.

Stress-test at the rate you'll actually pay. The FY2023–FY2024 dental vintages—originated when median note rates were around 9%–9.5%—are showing more defaults in the latest data. Model flat production, rising wages, lower PPO reimbursements and one vacant hygienist chair. If the deal only works with immediate growth, the industry's historical record won't save it.

Three industries in, a pattern is worth investigating: regulated operations with recurring demand can have unusually low historical SBA defaults. But lender selection, collateral and the owner's skill may explain part of the record. Industry averages are a starting point. Provider dependence, deal leverage and the actual cash flow decide the acquisition.

Want to check an industry we haven't covered yet? Look up its SBA default rate in Ink's industry data.

Dental practice loans defaulted at 1.17% a year from FY2017 through April 2026, against 2.82% across all SBA 7(a) loans. Of dental loans disbursed from 2010 to early 2016, 5.36% defaulted within ten years, against 11.59% for the program.

Licensed dentists can use SBA 7(a) loans for eligible acquisitions, subject to underwriting and state ownership rules. SBA marked 117 dental loans as changes of ownership in FY2023–FY2025. Non-dentist buyers may need a compliant MSO structure, whose economics and financing risks may be different from the dental-office loans in this data.

The median SBA dental acquisition loan was $689,000 in FY2025 and $825,000 across FY2023–FY2025. About one in five carried a 25-year term, suggesting that real estate was the principal financed asset in a minority of those loans.

According to the ADA's 2026 Survey of Dental Practice, the median general-dentist owner netted $199,140 in 2025 on $893,510 of billings. Solo owners netted a median of $179,360.

Source: SBA loan data.