Dentists and the Equipment Cycle: Who Is Paid Every Time

A dental practice buys a chair. Then a scanner. Then a mill, an imaging unit, a sterilisation suite, and the leasehold improvements that hold all of it.

Then, some years later, it buys them again. And again after that. Over a working career the same categories of equipment are acquired several times, and almost every one of those acquisitions is financed.

Nobody has ever asked where the interest went. That is the subject of this page, and it is not a question about a product.

What a dental practice actually finances

Equipment, and more of it than any other kind of professional practice. Operatory chairs and delivery units, handpieces, curing lights, an intraoral scanner, a milling unit where the practice does its own restorations, imaging hardware, and the sterilisation equipment that a regulator inspects.

The building it sits in, or the improvements to somebody else's. Plumbing, suction, compressed air, cabinetry and radiation shielding are not ordinary leasehold improvements. They are installed for dentistry and they age with the equipment they were installed for.

The practice itself, in most cases. A dentist who bought in, bought out a retiring principal, or opened cold started with acquisition debt, and that debt is usually still being serviced while the first equipment cycle arrives.

And the software. Practice management, imaging and design licences renew on their own schedule and are as close to a permanent cost as anything in the building.

The cycle, and why it is a function rather than a purchase

These items do not share a replacement date. A chair, a scanner and a mill were bought in different years, wear at different rates, and lose manufacturer support at different times. A practice is therefore rarely between cycles: it is always somewhere inside one.

So the financing is not an event. It is a standing function inside the business, performed continuously for as long as the practice operates, in the same way that payroll is a function rather than an event.

And functions are performed by somebody. Payroll is performed by the practice. Financing, on almost every dental file in the country, is performed by an equipment lender, a vendor finance arm, or the practice's own line of credit at a chartered bank.

Whoever performs it is paid for performing it, on every cycle, for as long as the cycle repeats. That sentence is the whole argument on this page. Nothing that follows adds to it; the rest is detail about who could perform the function instead.

Where the interest goes when somebody else performs it

Out of the practice, on schedule, and it does not come back. This is not a criticism of lenders. A lender that advances capital for a scanner and is repaid with interest has done exactly what it exists to do, competently and legally.

The money is not lost to bad luck or to a bad decision. It is transferred, according to a contract the dentist signed and generally understood, to an institution that is very good at receiving it.

What is unusual about dentistry is the repetition. A household finances a house once and a car every several years. A dental practice finances its core production equipment again and again, so the same transfer happens on a loop for thirty years rather than a handful of times.

Add the loop up once and the total is the number nobody has seen. Not the rate on any single lease, which is usually competitive, but the aggregate interest across every cycle of a career. Most dentists have never been shown that figure because nobody in the transaction has any reason to produce it, and because each cycle is negotiated on its own as though the previous four had not happened.

What the equipment lender is paid for, described plainly

Three things, and only two of them are services.

Capital the practice did not have at the moment it was needed. That is real and it is worth paying for. A scanner that arrives when a practice needs it is worth more than one that arrives when the practice has saved for it, because the production it supports begins years earlier.

The risk that the practice does not pay. Also real, also priced, and it is priced higher for a young practice with acquisition debt than for an established one, which is why the earliest cycles are usually the most expensive.

And the financing function itself. The arranging, the holding and the recovery of the money. This is the recurring margin, it is charged on every cycle, and it is the only one of the three that a practice holding its own capital could perform for itself.

The question that follows

Who is performing the financing function inside this practice, and could it be the practice?

That is a question about control of capital rather than about a product, and it has an answer on every dental file whether or not anyone has ever articulated it. On most files the answer was settled once, early, by whoever was selling equipment finance at the time.

A dentist who asks it deliberately usually decides differently. Not because a cleverer instrument was found, but because the function was named and then assigned on purpose rather than by default.

Infinite Financial Sovereignty®, and whose idea it was

The underlying idea is not this practice's. The method Nelson Nash named The Infinite Banking Concept® is a mark of Infinite Banking Concepts, LLC, described in his own writing, and neither Canadian Wealth Creation Centre Inc. nor Jose Salloum is affiliated with that organisation or endorsed by it.

Infinite Financial Sovereignty® is this practice's own registered mark, and it names one narrower discipline carried out over a lifetime: that a business should be its own source of capital for the purchases it makes repeatedly.

In practice it means holding capital inside a participating whole life contract issued by a federally regulated insurer. The contract accumulates a contractual value. When capital is needed, an advance is taken against the contract rather than arranged with an outside lender, and it is repaid on a schedule the owner sets.

None of this is free, fast, or a way of avoiding interest. The insurer charges interest on an advance. The costs of the contract fall heaviest in the early years. What changes is the destination of the financing margin, not its existence.

What it would look like inside a dental practice

The first cycle is usually financed the way it always was. Capital takes years to accumulate, so a practice starting this does not stop using lenders in year one, and any presentation suggesting otherwise should be treated with suspicion.

By a later cycle the practice has a second option. A scanner replacement that would have gone to a vendor finance arm can instead be funded from capital the corporation controls, and repaid into a structure the corporation owns.

The repayment is the part that matters and the part most often skipped. A practice that takes an advance and does not repay it has not performed the financing function, it has simply borrowed on different paper. The discipline is the strategy; the contract is only where the capital sits, and a dentist who will not hold to a repayment schedule they set themselves should not begin.

The death benefit is doing its own job the whole time. This is life insurance. Its primary purpose is what it pays on death, which for an incorporated dentist with acquisition debt and a family is not a secondary consideration.

And a slow quarter is easier. Capital already under the practice's control does not have to be applied for in the month a practice would least like to be applying for anything.

The corporation, and what corporate ownership decides

Most Canadian dentists in a position to consider this are incorporated, so the ownership question arrives immediately and it is not a formality.

Three decisions have to be made together: who owns the contract, who pays the premium, and who is named as beneficiary. Deciding them separately, or letting them be decided by whoever fills in the application, is the commonest expensive error in this whole area and it is set out at length under corporate-owned life insurance.

A mismatch does not announce itself. Where one entity pays a premium and another is advantaged by that payment, a taxable benefit can arise for whoever was advantaged, and it is typically discovered years later on an audit or during a sale, covering several years at once.

What a provincial regulator permits a dentistry corporation to do, and who may hold its shares, differs by province. That is a question for a lawyer who works with professional corporations where you practise, not for a national website.

What the corporate tax treatment depends on

On facts about your corporation, and it must be confirmed with your own accountant before anything is applied for. That sentence is not a disclaimer attached to the end of an argument. It is the argument's load-bearing condition.

Premiums are generally not deductible, which surprises dentists because so much else running through the practice is. A narrow exception can apply where a policy is assigned as collateral for a loan used to earn income, subject to conditions that must be met rather than assumed.

Growth inside the contract is not taxed annually while the contract remains exempt under Regulation 306, Income Tax Regulations. Exempt status is a condition to be maintained, not a property the product inherently has, and a contract altered carelessly later can lose it.

On death, the amount by which the benefit exceeds the policy's adjusted cost basis is credited to the Capital Dividend Account under ITA s.89(1), from which a capital dividend may be elected. The credit is the excess rather than the whole benefit, the adjusted cost basis moves over the life of the contract, and the election is a filing that has to be made correctly. Your accountant calculates this. Nobody else should.

The spouse who does not work in the practice

Most incorporated dentists have one, and the arrangement is usually treated as a footnote when it is closer to half the picture.

Coverage on a spouse outside the practice is a household matter rather than a practice one. It is owned differently, priced differently, and it exists for a different reason, which is that a household with young children loses more than income when a non-earning parent dies.

Shareholding by a spouse who performs no work in the corporation has been narrowed by the rules on income splitting. Arrangements that were ordinary a decade ago may not be now, and the test is applied to facts rather than to intentions. An accountant reviews this; a website cannot.

And there is the outcome nobody plans for. A spouse who inherits a dental practice they cannot operate holds a depreciating asset with a shrinking patient list, which is why the succession question arrives for a dentist long before the retirement question does.

What this does not do

It does not eliminate interest. The insurer charges interest on an advance, and a presentation that leaves that out has misdescribed the arrangement rather than simplified it.

It does not reduce a dentist's personal tax bill. Nothing here is a deduction, and any suggestion that a premium is a way of paying less tax this year is wrong.

It does not replace a line of credit, and a practice should keep committed external credit for payroll timing and for emergencies that outrun any accumulated capital.

It does not outperform a market portfolio measured as a return, and a dentist shopping on rate of return will be disappointed by an honest comparison. Participating whole life insurance is an insurance product and not an investment, which is a difference in purpose rather than a difference in marketing.

And it does not survive being started and abandoned. A contract surrendered early returns less than was paid into it, permanently.

Who this does not suit

A practice without durable surplus in a normal year, as distinct from a good one. Surplus that appears only in the strongest years is not the raw material this requires, and a practice that has to reach for it has already answered the question.

A dentist who may need the money back within a few years. Early exit is a loss rather than a delay, and there is no version of this in which that is not true.

An associate or a new owner still carrying heavy acquisition debt at a high rate. Repaying expensive debt is usually the better use of the same dollar, and saying so costs this practice a sale it would otherwise have made.

And a dentist within about a decade of leaving. The early costs will not have been recovered, the compounding has no time to work, and the honest answer is no. A no delivered in the first half hour is worth more than a yes delivered by somebody who wanted the sale.

What stands behind the contract

The contractual obligations of the issuing insurer, and nothing else. They depend on that insurer's continued solvency and they are not backed by any government, which is a materially different position from a deposit at a chartered bank.

Assuris protects Canadian policyholders within its published limits where an insurer fails. That is meaningful and it is not the same thing as deposit protection, and the difference is worth understanding before rather than after.

Dividends are not guaranteed. They are declared annually at the discretion of the insurer's board based on the performance of the participating account, and past dividend performance does not indicate future results. The guaranteed schedule in a contract and the projected values above it are two different columns on the same page, and they should be read separately.

The order to do it in

Find out what the practice has actually paid in financing costs across every cycle so far. The lease documents and loan statements are in the office. Nobody has added them up, and the number changes the conversation more than anything on this page. It is also the one figure in this whole subject that is a fact rather than a projection.

Then ask what the next cycle will be, and when. Every practice knows this approximately and almost none has written it down.

Then take both to your accountant, before any insurance conversation. The questions are whether the corporation is the right owner, what the passive and active position looks like, and whether the shares are intended to be sold one day.

Then, and only then, look at whether a contract belongs in the picture at all. Purpose first, structure second, product last. Reversing that order is common precisely because only the last step pays a commission.

Three of those four steps cost nothing and earn nobody anything, which is worth knowing about the order in which they are usually proposed.

Who you are dealing with

IBC Financial is the education platform and trade name of Canadian Wealth Creation Centre Inc. Every client relationship, every piece of advice and every insurance product comes through Canadian Wealth Creation Centre Inc. and its duly certified representatives, and this page is education rather than advice about any particular practice.

Everything here is written by somebody paid a commission by an insurer when a contract is issued, which is stated at the foot of every page on this site and is a reason to check the arithmetic rather than to accept it.

The corporate structuring that sits underneath all of it is in business owners, the mechanism of the contract itself is in how a participating policy works, and the case for an incorporated physician, whose corporation holds investments rather than an operating practice, is a different argument set out separately for incorporated physicians.