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Financing Your Second Location by Dr. Kevin Baharvand

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Categories: Financial Planning and Investments; Practice Transitions;
Financing Your Second Location 

Why cash flow is king

by Dr. Kevin Baharvand

Opening a second location is one of the most exciting milestones in a growing orthodontic career. After the challenges of launching your first office, from negotiating leases and hiring a team to building a patient base, it’s natural to think the second will be smoother. You’ve done it before. You have systems in place. You even have a logo this time.

But when it comes to financing that second location, many orthodontists hit an unexpected wall.

In reality, getting a loan for your second office can be more difficult than getting your first. It usually comes down to two things:
  • Cash flow, both personal and business
  • Debt-to-income ratio, and how it looks on paper to a lender

This article breaks down why those numbers matter, how banks evaluate them and what you can do to prepare for financing a second practice the right way.

The first loan is about potential. The second is about proof.
When you applied for your first loan, the process was probably more encouraging than you expected. Lenders were mostly focused on your W-2 income, your clean credit and the fact you’re a licensed orthodontist. They were betting on your future potential. The assumption was that, like many before you, you’d turn that startup into a successful practice.

The second time around, the tone changes.

Now you’re a practice owner. You have a track record. And this time, the bank is no longer betting on what you might do. They’re only interested in what you’ve already done.

Lenders aren’t looking at the theoretical upside of your new location. In fact, most of them already have a very clear idea of what it typically costs to build and open a second practice. They’ve seen it before, often hundreds of times, and they know what the monthly payments and operating overhead will look like even before they open your spreadsheet.

So instead of focusing on future projections, they ask a simple question: Can your current financial reality support the expected costs of this next expansion?

If your first office is producing strong, consistent cash flow and your personal financial picture is solid, there’s a path forward. If not, lenders will hesitate. Not because they doubt your skills, but because the math doesn’t work.

Understanding cash flow (and why it matters so much)
Cash flow is the amount of money left over after all business expenses have been paid. It’s not production. It’s not collections. It’s what’s available once your staff is paid, your rent is covered and your existing loans are serviced.

Banks care about cash flow because it tells the real story. They want to see that your practice can stand on its own, month after month, not just survive during a growth spurt or when marketing is heavy.

Lenders evaluate two sides of cash flow:

1. Business cash flow
Your first location must be stable. Not just busy, but truly profitable. The bank will study your profit and loss statements, tax returns and debt schedule to make sure your business has room to support more debt. If margins are tight or the office is still breaking even, a second loan becomes a much harder ask.

Remember, lenders already know what a second location typically costs. They don’t need a deep dive into your projections. They simply want to confirm your existing office is producing enough real cash to absorb the additional financial responsibility.

2. Personal cash flow
Your personal financial position is just as important. Are you paying yourself a consistent income? Are your personal obligations, such as student loans, mortgage and family expenses, balanced with your earnings?

You could have a healthy practice, but if your personal finances are stretched or unpredictable, the overall picture weakens. Banks are looking for stability across the board because at the end of the day, they’re underwriting you as much as your business.

Debt-to-income ratio: The silent deal breaker
Debt-to-income ratio (DTI) is one of the most important and least talked about metrics in second-location financing.

This ratio compares your total monthly debt payments, both personal and business, to your total monthly income. Lenders use it to measure your ability to take on more debt without tipping into a risk zone.

DTI includes:
  • Student loans
  • Mortgage or rent
  • Car payments
  • Credit card balances
  • Your current practice loan
  • Any co-signed or personal guarantees on other debt

Even if everything is paid on time, if your DTI is too high, it can disqualify you from getting approved. It is one of the first filters a loan officer will run before your application goes any further.

This is especially important if you’re also considering buying a home or refinancing during the same period. Taking on multiple large debts at once can push your DTI past what lenders will accept, even if your income is strong.

Banks won’t tell you not to buy a house or start a family. But they will expect your personal debt and lifestyle expenses to be in proportion to what your practice and your paycheck can actually support.

The lien problem no one tells you about
Here’s where it gets trickier.

When you financed your first office, your lender likely placed a lien on your business. This means they hold a legal claim to your practice assets in the event of default.

No other bank wants to be second in line. If your first lender still holds that lien, most new lenders won’t fund your second location unless they can take first position. And unless the same lender is willing to issue another loan, you’ll be stuck.

This forces many doctors to consider a full refinance. That means consolidating the old loan and the new loan under one lender so they can clear the lien and reissue financing as a single package.

This process requires coordination, time and often financial review. It is doable, but it’s something that must be explored early. You don’t want to discover the lien issue after you’ve already signed a lease or broken ground.

Planning ahead: When to move forward and when to wait
Orthodontists tend to be intelligent, driven and opportunity-minded people. We spot needs in the market. We notice commercial spaces going up. We run into doctors who are retiring. Our minds are always spinning with possibility.

But sometimes, the smartest move isn’t jumping at the opportunity. It’s holding off until you’re truly ready.

Just because you can see the upside of a second location doesn’t mean the timing is right. Financial strength is just as important as clinical ability when it comes to expansion. If your business or personal cash flow is tight, if your DTI is creeping up, or if your first office still depends heavily on you to function day to day, the best move may be to pause.

That’s not a step backward. It’s disciplined growth. It’s protecting the foundation you’ve already built.

So before you commit, ask yourself:
  • Is my first practice consistently profitable, not just growing but stable?
  • Am I paying myself a regular income I can live on?
  • Are my personal finances in order, without relying on business cash flow to fill gaps?
  • Is my current debt manageable with room for more?
  • Have I checked the terms of my existing loan to understand the prepayment penalty and the lien position?

If the answer to these questions isn’t a clear yes, the opportunity will still be there when you’re ready. And when you do go for it, you’ll be better positioned to secure the loan and lead the practice with confidence and clarity.

Final thoughts
A second location is more than a sign of success. It is a test of readiness.

It challenges not just your leadership, but your financial discipline. Banks will look closely at how your first office is performing, how you manage your income, how your debts stack up and whether your goals are grounded in financial reality.

Their job is to say yes when the risk is low and the numbers are right. Your job is to get your numbers and your systems there.

If your cash flow is strong, your DTI under control and your personal finances in balance, then the road to a second location becomes a real and sustainable path, not just a tempting idea.

Wait until you’re ready. Then build something even better. 
Author Bio
Dr. Kevin Baharvand Dr. Kevin Baharvand, founder of White Glove Orthodontist (WGO), grew up in a medical family where money discussions were taboo. Fascinated by both the clinical and business sides of orthodontics, he launched seven startups in various settings, overseeing every aspect before delegating to his trusted team. He’s also consulted for practices nationwide. Baharvand holds a master’s in organizational leadership and is an active Texas Realtor. Believing orthodontists get little value from dental consultants, he aims to make startup programs more affordable by sharing his successful systems. When not seeing patients at Elate Orthodontics or improving WGO programs, he cherishes time with his wife, three kids and two fur babies
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