If you’re considering buying a dental practice in the St. Louis region, you’ve probably heard the term “contingencies.” But what does that really mean for you as a buyer?
When purchasing a dental practice, the sale contract—often called an Asset Purchase Agreement (APA)—will spell out conditions that must be met before the deal can officially close. These are known as contingencies, and they protect both the buyer and the bank financing the transaction.
Typical Contingencies in a Dental Practice Sale
1. Due Diligence
You’ll usually have a set period of time to conduct additional due diligence—reviewing charts, financial records, and other details. Once that period ends, you won’t be able to request more information unless the seller agrees.
2. Financing Approval
The purchase is also contingent on securing suitable financing. Banks often take weeks to finalize approval, so it helps to start the pre-approval process early. Keep in mind, lenders will need documents like your tax returns, net worth statement, and personal budget—delays in providing them can put your closing date at risk.
3. Lease Agreement
Perhaps the most challenging contingency involves securing an acceptable lease. Lenders typically require a lease that matches the repayment schedule of your loan (e.g., a 7-year amortization means a 7-year lease, or at least a 5-year lease with renewal options).
-
If the seller’s lease is near expiration: The landlord will often be open to negotiating a new lease with you.
-
If the seller’s lease is long-term: The landlord may push for you to assume it, which may not work for your bank or the seller, since they could remain liable if you default.
Leases can take weeks—or even months—to finalize, which can delay closing.
Why Contingencies Matter
Until financing, lease, and due diligence contingencies are resolved, the seller doesn’t have certainty the practice is sold. This often prevents:
-
Early introductions to staff
-
PPO credentialing before closing
-
A smooth transition in collections and reimbursements
Even with a signed APA and a set closing date, the deal isn’t final until those contingencies are satisfied.
The Bottom Line
Contingencies protect you as the buyer—but they also add complexity and uncertainty to the timeline. Understanding them upfront will help you avoid delays and frustration.
If you’re considering buying a dental practice in the St. Louis area, we’ve helped clients navigate these issues for decades. Reach out—we’ll guide you through the process from start to finish.
– Bill Otten & Kim Rey
