What a lender cannot see behind a group's EBITDA

A dental group showing $1.4M in EBITDA across eight locations can look exactly the same on a financial QoE whether that number is being produced consistently across every office, or whether two locations are carrying the rest while three others have a combined $300K to $400K in revenue they should be generating but aren't.

The financial report doesn't distinguish between those two scenarios because it's not designed to, and nobody else in the transaction evaluates it either. The operational layer, the part that shows how the EBITDA actually gets produced day to day at each site, it just falls between disciplines entirely. No-show rates running double the group average at specific offices because the front desk process is different at every location and nobody standardized it, patients who fell out of recall and were never re-engaged, treatment that was accepted but never scheduled. That kind of variance means the EBITDA being underwritten is concentrated in a few locations rather than distributed across the group, and the moment anything shifts at those strong offices, whether because a lead provider leaves or a competitor opens nearby or volume moves seasonally, the aggregate number starts softening because the underperforming locations have no upward trajectory to offset it and haven't for over a year.

That's a meaningfully different risk profile than an EBITDA where all eight locations are contributing proportionally because the operations underneath are actually systemized, even though both scenarios look identical on the financial QoE the loan gets structured around. Not to mention the earnings have less cushion than the numbers suggest, which means debt service coverage can tighten faster than anyone modeled for.

When the operational picture gets evaluated before the transaction, the lender gets visibility into whether the earnings have real durability across locations or whether they're being held together by a minority of offices that happen to be performing well. That's a meaningful input into how the loan gets structured and how the risk gets modeled, and right now it's a piece of the picture that doesn't get produced at any stage of the deal by anyone.