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As DSOs move into 2026, access to capital has improved incrementally from the constrained environment of the prior two years. Interest rates have stabilized, alternative capital sources have matured, and some liquidity has returned to key segments of the credit market.
However, improved access to capital has not translated into improved profitability. For many DSOs, margin compression remains persistent and structural, driven by labor costs, operating complexity and cost increases, and competitive pressures. As a result, executive teams are increasingly focused not just on access to capital, but on how capital is structured and deployed.
In this environment, capital strategy has become inseparable from operational strategy.
Margin Compression Is Forcing Smarter Capital Structures
DSOs continue to face sustained EBITDA pressure from multiple fronts:
- Wage inflation and ongoing clinical staffing constraints
- Higher vendor, lab, and technology costs
- Increased overhead associated with centralized operations
- Slower margin expansion despite topline growth
While acquisitions and de novos continue to drive revenue, they also increase capital intensity and integration risk. As margins tighten, DSOs are being forced to reassess whether traditional ownership-based capital investments still make sense for every asset on the balance sheet.
Technology Investment Has Shifted From Growth to Margin Protection
The current wave of dental technology adoption is materially different from prior cycles. In 2026, investments are increasingly justified by labor efficiency, throughput gains, and standardization across locations, rather than incremental clinical differentiation alone.
Key technology categories drawing DSO investment include:
- AI-driven diagnostics and treatment planning
- Advanced intraoral scanning and digital workflows
- Chairside CAD/CAM and next-generation milling systems
- 3D printing for surgical guides, restorations, and aligners
- Automation platforms for scheduling, billing, and revenue cycle workflows
While these technologies can be margin accretive, they also come with high upfront costs and increasingly short refresh cycles—making outright ownership less attractive in a compressed-margin environment.
Why Operating Leases Are a Win in 2026 for DSOs.
Operating leases should be increasingly viewed by DSO executives as a way to modernize clinical infrastructure without over-capitalizing the balance sheet.
Key benefits include:
- Preservation of cash and revolver capacity
- Predictable operating-expense payments aligned to usage
- Reduced balance-sheet leverage versus term debt
- Easier technology refresh and upgrade cycles
- Lower obsolescence risk in fast-evolving technology categories
Rather than deploying capital into depreciating assets, operating leases allow DSOs to maintain flexibility while still standardizing technology across their footprint.
Technology Example: Chairside CAD/CAM at Scale
Consider a DSO rolling out chairside CAD/CAM milling across 40 locations. A traditional purchase model may require significant upfront capital per site, tying up cash and increasing leverage—often before productivity gains are realized.
Under an operating lease structure:
- Equipment costs are spread evenly over the lease term
- Payments are treated as operating expenses
- Lease duration can match expected technology refresh cycles
- Capital remains available for integration, staffing, or de novo growth
For DSOs focused on EBITDA stability and cash-flow visibility, this structure often delivers a cleaner risk-adjusted return than outright ownership. Key CFO considerations include:
- Reduced upfront capital deployment
- Better alignment of expense recognition with revenue generation
- Improved liquidity and borrowing capacity
- Lower exposure to asset obsolescence
CFO Sidebar: Accounting and Leverage Implications of Operating Leases
From a finance leadership perspective, operating leases are increasingly being evaluated as risk-management and capital-allocation tools, not just accounting decisions.
As Kris Osborn, CFO of Tua, explains:
“For DSOs, operating leases are less about accounting optics and more about flexibility. When margins are tight, preserving liquidity and avoiding unnecessary balance-sheet risk becomes a strategic advantage—not just a finance decision.”
Board-Level Metrics that DSO CFOs Should Track
As capital strategy becomes more tightly scrutinized at the board level, DSO CFOs are increasingly reporting on capital efficiency metrics, not just growth metrics. Operating leases tend to perform favorably across several of these measures.
Common board-level metrics include:
- Adjusted EBITDA Margin
Leasing can stabilize EBITDA by smoothing expense recognition and avoiding depreciation volatility tied to large capital purchases. - Free Cash Flow Conversion
Operating leases preserve upfront cash, improving near-term free cash flow and funding flexibility. - Technology Refresh Risk Exposure
Lease terms aligned with refresh cycles reduce stranded asset risk and future write-downs.
For boards focused on sustainable performance rather than headline growth, these metrics increasingly guide capital-allocation decisions.
Speed and Structure Still Matter
Even with the right capital structure, speed of execution remains critical. Delays in approving or funding equipment investments can result in lost production, extended staffing inefficiencies, and uneven execution across locations.
Traditional lenders often struggle to support operating lease structures at DSO scale—particularly when rapid deployment is required across multiple sites.
As a result, many DSOs are complementing bank relationships with alternative and embedded capital platforms that understand dental workflows, technology cycles, and enterprise operating models. Providers such as TuaCommercial are designed to support operating leases and flexible capital structures aligned to multi-site dental organizations.
Conclusion: Capital Efficiency Is Now Imperative
While access to capital has improved heading into 2026, the structural realities of dentistry remain unchanged.
The DSOs that outperform will be those that:
- Deploy capital deliberately
- Structure it intelligently
- Measure it rigorously
“Strong DSOs understand how to balance cash flow preservation, EBITDA optimization, and disciplined capital allocation—and they know when to lease versus buy. Operating leases offer DSOs a flexible way to manage cash flow while staying competitive in an increasingly capital-intensive environment,” says Samantha Strain, Founding Partner and Chief Development Officer of HealthStream Ventures.
Margin pressure, labor constraints, and accelerating technology cycles continue to challenge DSO performance. In this next phase of the dental market, capital efficiency—not capital abundance—will define long-term enterprise value.
Contact Sourav Neogi at TuaCommercial for a quote for an operating lease program for your next equipment acquisition. You can reach Sourav at souravN@tuacommercial.com or visit TuaCommercial online.
