How to Raise Capital for a Dental or Medical Practice From Private Investors
By Joel Arberman, founder of Prepared to Raise · 17 companies taken public, 30+ private placements prepared · Published November 9, 2026
Loan first, then investors for the gap
Lenders like practices: predictable revenue, licensed owners, equipment that holds value. A practice with $400,000 of annual profit can commonly borrow for a buildout and equipment on reasonable terms with a personal guarantee. Run that number before you raise equity. Investors make sense when the plan is larger than lenders will fund (a multi-location expansion, an acquisition), when the owner wants to avoid a guarantee, when the practice is too new to borrow, or when a layer of equity is what qualifies the practice for the loan. Investors or a loan.
The ownership rules that decide what investors can buy
Many states prohibit the corporate practice of medicine or dentistry: only licensed professionals may own the entity that delivers care. Investors therefore usually invest in one of these instead:
- A management services organization (MSO or DSO). A separate company that owns the non-clinical assets, employs non-clinical staff, holds the lease, and provides management to the practice under a management agreement for a fee. Investors own the MSO. This is how most practice groups take outside capital.
- The real estate. An LLC that owns the building or the condo unit and leases it to the practice. Investors like it because the tenant is a practice they can see, and the return is rent.
- The practice itself, where state law allows non-professional ownership (some states for dentistry, fewer for medicine) or where the investor is also a licensed professional.
The management fee, the lease and the governance between the clinical entity and the MSO have to be set up correctly or the structure fails both the regulators and the investors. This is specialist healthcare counsel work and it comes before the securities work.
What practice investors want to see
- Production and collections history by provider, with the payer mix, and a clear statement of what the owner takes out as compensation versus profit.
- A location plan with real numbers. Demographics, competing practices, the lease, the buildout budget with contractor quotes, equipment quotes, and a ramp to breakeven based on the first location's history.
- The provider plan. Who will see patients at the new location, how they are paid, and what happens to production if the owner is not there. Key-person risk is the first worry about any practice raise.
- A return from cash flow. Practices rarely sell to strategics at startup multiples, though DSO and MSO roll-ups have created a real market for groups. Most practice raises use preferred units with a preferred return and a buyback, or a note, with a sale to a larger group as upside rather than the plan. How to structure it.
- Compliance in order. Licenses, credentialing, the management agreement, and no fee-splitting or referral arrangements that violate anti-kickback or state rules.
Where the investors come from
Practice owners usually have a strong Pool 1: colleagues from residency or dental school, referring providers, specialists you refer to, vendors, long-time patients who are business owners, and family. A $1 million MSO raise from 20 to 30 investors in that network under Rule 506(b) is a common shape. How to raise from people who know you. Patients are a sensitive source; take advice on the ethics rules and the optics before you include them, and never let an investment affect care.
Typical structure and size
- Second location: $500,000 to $1.5 million, often split between an equipment and buildout loan and investor capital in the MSO or real estate entity.
- Acquisition of a practice: $750,000 to $5 million, with seller financing, a practice acquisition loan and investor equity layered.
- Partner buyout: often $500,000 to $2 million, where a note or preferred units from investors replaces a bank loan the remaining owner cannot or will not guarantee.
How to size the raise and how much equity for $100,000 apply directly.
Mistakes specific to practice raises
- Selling units in the professional entity to non-licensed investors in a state that prohibits it.
- A management fee set without regard to fair market value, which creates regulatory and tax problems.
- Promising returns tied to patient volume in ways that look like fee-splitting.
- Projections based on the owner's own production at a location the owner will not staff.
- Skipping the securities side because the investors are colleagues. The raise is still an offering, with the exemption, documents and filings that go with it. There is no friends-and-family exemption.
The preparation sequence
Healthcare counsel on structure first; then the plan, numbers and return scenarios; then the investor materials; then securities counsel for the offering documents; then the list and the outreach. The 90-day preparation plan lays it out. Prepared to Raise prepares practice-group raises on fixed fees and never finds, solicits or introduces investors; the healthcare structuring is done with your own counsel.
Related questions
Can non-dentists or non-physicians invest in my practice?
In many states, not directly in the clinical entity. Investors typically own a management services organization or the real estate instead, under a management agreement or lease with the practice. State rules vary, so confirm with healthcare counsel.
Should I borrow or raise equity for a second location?
Borrow for the equipment and buildout if the current practice can carry the payments; use investors for the portion lenders will not fund, for an acquisition larger than your borrowing capacity, or when a stronger balance sheet is needed to qualify for the loan.
What return do practice investors expect?
Commonly a preferred return paid from MSO or real estate cash flow, with a buyback at a multiple after several years, and the possibility of a sale to a larger group as upside. The specific numbers depend on the structure and the risk of the plan.
Can my patients invest in my practice?
Sometimes, through the MSO or real estate entity and subject to professional ethics rules and securities law. Treat it carefully: the investment must never affect care, and the optics matter. Many owners limit the raise to colleagues, vendors and family.
Where to start
Settle the entity structure with healthcare counsel, then follow the 90-day preparation plan. Where small-business investors come from and how to show a return without a sale cover the two questions practice owners ask most.
This article is general information for founders, not legal, tax or investment advice. Securities rules depend on your facts; confirm your plan with a securities lawyer before you accept money.