How Rising Interest Rates Affect Buying or Selling a Dental Practice

Rising interest rates make the same dental practice more expensive to finance. Buyers keep a little less of what the practice earns, the loan a practice's cash flow can support gets smaller, and sellers whose price depends on a stretched loan feel it first. For a healthy practice, the Federal Reserve's September 2026 increase changes the math only slightly, and the SBA's tighter lending rules, which took effect on October 1, matter at least as much.

Whenever the Fed moves, the buyers and sellers I talk to ask some version of the same question. Should we wait?

For most buyers the answer is no, but it depends on the practice. So here's what the latest increase actually changes, with real numbers for both sides of the table. I'll use the same sample practice as our guides on how to value a dental practice and what private practice dentists make: about $1.2 million in collections, $500,000 a year to the owner before loan payments, and a price of about $850,000. Then I'll show you a practice where rates bite harder. Rates move, so every number here is as of late October 2026.

Where Interest Rates Stand in October 2026

On September 16, 2026, the Fed raised its target for the federal funds rate by a quarter point, to a range of 3.75% to 4%. It was the Fed's first increase since July 2023. Between September 2024 and December 2025 it had cut six times, taking the range down from a peak of 5.25% to 5.50% to 3.50% to 3.75%.

The prime rate moves in step with the Fed's target and sits 3 points above the top of its range, so it rose from 6.75% to 7.00%. That still leaves prime 1.5 points below the 8.50% buyers faced from July 2023 to September 2024. Rates are rising again, but from a lower starting point than the last time they made headlines.

Don't count on a quick reversal. In the Fed's September projections, 16 of its 18 officials expected at least one more increase before the end of 2026. Their median forecast puts the federal funds rate around 4.1% at the end of both 2026 and 2027, higher than they forecast in June. The Fed meets again on October 27 and 28 and on December 8 and 9, so check the current prime rate before you run any numbers.

How the Prime Rate Sets Your Practice Loan Rate

Many practice purchases are financed with SBA 7(a) loans, and the SBA caps what a lender can charge on them. For a variable-rate loan, the cap is the prime rate plus a spread that shrinks as the loan gets bigger:

Source: U.S. Small Business Administration, 7(a) loan program terms, conditions and eligibility.

A loan to buy a general practice is usually well over $350,000, so 10% is the ceiling on a typical purchase loan today. Those are maximums, not quotes. Lenders can charge less, and conventional loans from banks that specialize in dental practices set their own rates and terms.

Many 7(a) loans carry a variable rate, so the payment moves when prime does, on the schedule written into the note. Fixed-rate SBA loans exist too, with their own caps. A fixed rate protects you if rates keep rising, and a variable rate falls on its own if they come down. Our guide to dental practice loan rates and loan types covers the options in more detail.

What Rising Rates Mean If You're Buying

Your Payments Go Up

Say you buy our sample practice for about $850,000, put 10% down and borrow $765,000 over 10 years. Here's what the rate does to your payments:

September's quarter point added about $1,300 a year. Every full point adds about $5,000 a year on a loan this size. That's real money, but against the $500,000 this practice pays its owner before loan payments, each point costs about 1 percent of the owner's income.

The Same Cash Flow Supports a Smaller Loan

The bigger effect is on how much you can borrow. Under the SBA rules that took effect on October 1, 2026, a practice's cash flow has to cover its loan payments at least 1.25 times over, measured on its last fiscal year or the average of its last two, not on projections. Lenders' exact formulas differ, but a simplified version starts with what the practice earns after paying the owner a fair wage for their own dentistry, divides it by 1.25, and treats the result as the most the practice can spend on loan payments.

Because that payment budget is fixed, a higher rate shrinks the loan it can carry. On a 10-year loan, each 1-point increase cuts the loan the same cash flow supports by about 4 percent. September's quarter point cut it by about 1 percent.

For our sample practice, that barely matters. After paying its owner about $240,000 for their own dentistry, it earns about $260,000, enough to support a loan of roughly $1.31 million at 10%. It only needs $765,000. Rates bite when the price is high compared with the profit, as in the second practice here:

Both practices assume the owner personally collects $800,000 a year and would cost about $240,000 to replace at 30 percent. Overhead is everything except the owner's pay, after add-backs. Real lenders' formulas vary, so treat this as an illustration.

The heavier-overhead practice can't support a typical price at any of these rates. At 70 percent of collections, or $840,000, a buyer would need a $756,000 loan, and the practice would cover its payments only 1.0 times, well short of 1.25. The most it can carry at 10% supports a price of about $673,000, or 56 percent of collections. Rates aren't the whole problem there, but they move the ceiling: September's quarter point took about $6,400 off the loan this practice can support, and today's rates still support about $36,000 more than they did at the 2023 to 2024 peak.

Should You Wait for Rates to Fall?

I wouldn't, for two reasons. First, the Fed doesn't expect them to fall soon. Its officials' median forecast has rates a little higher at the end of 2027 than they are today.

Second, waiting has a price of its own. In our sample, owning instead of working as an associate is worth about $139,000 in the first year, even after loan payments at 10%. A rate a full point lower would save about $5,000 a year. Even the national gap between owners and non-owners, about $68,500 in 2025 according to the ADA, is more than 10 times the cost of a point.

If rates do come down later, you're not stuck. A variable-rate loan's payment falls with prime without you doing anything. And the SBA charges a prepayment fee only on loans of 15 years or longer, and only when you prepay a quarter or more of the loan in the first three years, so a typical 10-year acquisition loan carries no SBA prepayment fee. Check your note for any other prepayment terms.

How to Protect Yourself as a Buyer

• Get pre-qualified now, and again before you sign. A rate change between your offer and your closing changes what you can borrow.
• Run your numbers 2 points higher. If the deal still works at 12%, it can absorb more than one more increase. Our dental practice loan calculator makes this quick.
• Ask about fixed versus variable. Find out how often a variable rate resets and what a fixed rate would cost.
• Price the practice on its profit, not its collections. A practice with heavy overhead can't carry a full price at any rate. Our guide to seller's discretionary earnings shows how to find the real profit.
• Keep a cash reserve. Plan for a slow first few months and at least one more rate increase.

What Rising Rates Mean If You're Selling

Your Price Is Capped by What Your Buyer Can Finance

Most private buyers borrow most of the price, so the most they can pay is tied to what a lender will lend against your practice's cash flow. A typical general practice sold to another dentist goes for about 65 to 80 percent of a year's collections. Where yours lands in that range depends mostly on profit, and rates matter most at the edges: a practice with heavy overhead, or a price near the top of the range, is the first to feel a higher rate.

That's why the second practice above matters to sellers. Its owner may hear that practices sell for 70 percent of collections and list at $840,000. A lender would see a practice that covers that loan only once, and the sale would stall. In a higher-rate market, pricing on profit from the start avoids that.

The Lender's Valuation Now Sets the Ceiling

Since October 1, 2026, an SBA lender has to order its own independent valuation when it finances a practice purchase. If your price is above that value, the buyer has to cover the difference with their own cash, and the loan can't exceed the valuation. An asking price your numbers can't support gets exposed early, which is one more reason to know your number before you list. Our guide on how to value a dental practice walks through the math appraisers use, and our free dental practice valuation calculator gives you a starting estimate.

Seller Financing Can Close a Gap

When a buyer can't borrow quite enough, a seller note can bridge part of it: you take part of the price over time instead of at closing. In an SBA deal, the October rules limit how that works. A seller note can count toward up to half of the buyer's 10 percent down payment, but only if you take no payments for the life of the SBA loan, which ties up that money for as long as 10 years. If you do carry a note, charge at least the IRS's applicable federal rate, or the IRS will treat part of your sale price as interest. Our guide to seller financing covers the terms, and your CPA should set the rate.

DSOs Are Paying More for Money, Too

Large DSOs backed by private equity borrow to fund their acquisitions, so they feel rates as well. In an October 2026 roundup in Becker's Dental Review, DSO executives said the cheap-money era is over. One dental group's CEO put DSO borrowing costs at 9.5 to 11 percent from 2023 to 2026, against loans of about 4 percent from 2019 to 2021. Heartland Dental's growth chief said high rates make it hard for groups to grow just by buying practices, so Heartland is looking for quality at a fair price.

The deal numbers send mixed signals. Becker's described a rebound in DSO deals earlier this year, but Levin Associates counted 51 dental acquisitions in the third quarter of 2026, down 27 percent from a year earlier, with DSOs behind 30 of them. For a seller, expect close scrutiny of your numbers, and expect part of any DSO offer to come as stock in the DSO or as payments tied to future performance rather than cash at closing. Our guide to selling to a DSO explains how those offers are structured.

Should You Wait to Sell?

If you're hoping rates will fall before you list, the Fed's own forecast says you could be waiting a long time. Meanwhile, the things buyers and lenders weigh most are within your control: steady or growing collections, sensible overhead and a practice that doesn't depend entirely on you. A practice with a strong trend sells well at today's rates, and a declining one won't be rescued by a rate cut. Our article on the best time to sell a dental practice covers the personal and market factors, and our guide to preparing to sell a dental practice covers what to fix first.

Already Own a Practice With a Variable-Rate Loan?

If you financed your own purchase with a variable-rate loan, your payment has probably gone up since September. As a rough guide, each quarter point adds about $165 a year for every $100,000 you still owe on a loan with about 10 years left. Budget for at least one more increase, since that's what most Fed officials expect, and ask your lender whether a fixed rate is an option. If you sell, the loan is paid off from the proceeds at closing, so it doesn't change what a buyer pays, but it does change what you walk away with.

Ready to Buy or Sell?

If you're buying, get pre-qualified so you know what you can borrow at today's rates, then browse dental practices for sale. If you're selling, start with our free dental practice valuation calculator, and talk to one of our brokers about where your practice stands in this market. Either way, run the numbers at today's rates and a couple of points higher before you commit.

Sources and Further Reading

Every rate and rule in this guide comes from the sources below. The Fed and SBA pages are also the best places to check for changes after this article was written.

Interest Rates

• Federal Reserve: FOMC Statement, September 16, 2026. The quarter-point increase and the vote.
• Federal Reserve: Summary of Economic Projections, September 2026. Officials' forecasts for the federal funds rate through 2028.
• Federal Reserve: Open Market Operations. Every change to the federal funds target, with dates.
• Federal Reserve: Selected Interest Rates (H.15). The current bank prime loan rate.
• Federal Reserve: FOMC Meeting Calendar. When the next rate decisions come out.

SBA Lending

• U.S. Small Business Administration: 7(a) Terms, Conditions and Eligibility. Maximum interest rates by loan size, maturities and prepayment fees.
• U.S. Small Business Administration: 7(a) Loans. How the loan many dentists use to buy a practice works.

DSO and Deal Activity

• Becker's Dental Review: What the Cheap-Money Era Has Taught DSOs (October 2026). Three DSO executives on borrowing costs and acquisitions.
• Becker's Dental Review: Dentistry M&A Transactions Drop 27% Year Over Year (October 2026). Levin Associates' count of third-quarter deals.
• Becker's Dental Review: The DSO Rebound (May 2026). Why DSO deals slowed after 2022 and picked up again.

Seller Notes and Taxes

• IRS: Applicable Federal Rates. The monthly rates the IRS uses to test the interest on seller notes and other private loans.