Best Banks for a Dental Practice loan
Financing the purchase of a dental practice can be a daunting process.
There are many avenues of finance and each lender will have their own policies and procedures for you to follow. They each will lend a certain percentage on a purchase or a start up and base their interest rates on your experience, location, history and many other contributing factors.
Some will have early repayment charges, some arrangement fees and they all vary as to what security if any they require. The Samera Finance team have 80 years of financial experience and have contacts in all the major lending teams to obtain for you several offers of finance that we can then talk you through as to the subtle differences of each.
Listed below, are the major lenders in the UK Dental market and an outline of their lending criteria
|Name of Bank/Lender||Amount Available||Term of Loan Available|
|National Westminster Bank||Specific amount per dentist||15 years|
|Barclays Bank||Percentage of the purchase price||15 years|
|Lloyds Bank||Percentage of the purchase price||15 years|
|HSBC Bank||Percentage of the purchase price||7 -10 years|
|Wesleyan Bank||Percentage of the purchase price||15 years|
|Metro Bank||Percentage of the purchase price||15 years|
|Santander Bank||Percentage of the purchase price||15 years|
Is owning a dental practice worth it?
Whether you are getting a loan to buy your first – or next – dental practice, being a dental practice owner is one of the most rewarding experiences that the medical industry can provide. Being able to offer essential dental care and treatment to your community is as rewarding you to personally as it is to the public.
However, owning your own dental practice requires many, often tedious, tasks that are as confusing as they are strict. Financing, for example, is extremely tricky – therefore, we hope that the article below helps to shed some light on this frustrating process.
If you are currently seeking financing for the purchase of your dental practice, contact Samera Business Advisors. We will help you to achieve your goals, and building your future.
As you’ve probably suspected, there are many “unspoken rules” to negotiating with a major financial institution. Here are a few items that you must consider before making contact.
What banks are looking for in a dentist
Unless you are being represented by a business advisor, or a professional who is qualified in dental practice transactions, you will be expected to provide the following:
- Details about your assets liabilities, personal Income and expenditures over the last three years or SA302s – and the appropriate documentation
- They might also ask for details of hours you’ve worked, list of services provided, or even your earning history as an Associate Dentist
- Your personal financial track record will also come into play: how you’ve managed your finances, high credit card bills, low credit score, etc)
- Your current living situation i.e. do you own your own house or rent
Deposits for your dental practice loan
Private/NHS/mixed practice lenders will usually lend 70% to 80% of the value of the “good will money”. However, it is possible to borrow up to 95% of the value, but usually you must offer some additional collateral in order to perform the transaction, such as a buy to let property or your existing residential home.
However the banks will also take into account the practice’s EBITDA (next section) to repay the loan, and cover any additional costs as well as providing the required standard of living adjustments.
Learning and using EBITDA
It is important to understand what EBITDA is before buying a dental practice. EBITDA is a calculation that professionals use in order to get a clear picture of the “true profit” of their dental practice.
Essentially, EDITDA is: Earnings before Interest, Tax, Depreciation and Amortization. From the profit and loss account: you take the net profit figure (before tax and interest costs), and add back depreciation and any debt interest repayments.
Be very careful not to be misleading when presenting your sales figures. EBITDA has been calculated by adding on items that you will still have to pay – we often see subscriptions, travel, repairs and renewals added back on (they will still be a cost to you going forward). Doing this will inflate the EBITDA, which will jeopardize your loan.
Always question outside reports and accounts
Sometimes, accounts can be misleading (i.e valuations, investment profits). Without the proper context, the avalanche of reports you will review while buying your dental practice will be enormous, it will be easy to lose focus. Things may be hiding in your accounts might no longer be necessary. On occasions we have even seen costs included that are relevant to another practice entirely!
It is always important to trust the reports your receive, but verify them. Although it would be lovely if we could trust every document that is handed to us, people make mistakes. It is our job to catch these slight missteps before they cause any problems.
Honesty is essential
When you own a practice, you need to be good at many things – other than dentistry. You may need to deal with complaints, sickness, CQC, Health and Safety, debtors, invoicing, marketing and all of the other trappings of owning and operating your own successful dental practice.
Ask yourself – and be honest – do you have the skills to manage these tasks?
Be straightforward with yourself about your skills as well as your limitations, and you will go far as a private dental practitioner. Also, this will give you a good idea of the kind of staff requirements that you will need moving forward to fill in the gaps. These figures will also factor into your loan application.
Establishing a squat dental practice
Many young dentists are hoping to start-up a squat practice. In order to do this, you will need: to locate a suitable premises, and obtain the D1 planning needed for dentistry.
You will need to prepare a business plan showing the area’s demand for the practice in covering: competition, other local services, hours of opening and provision of services, and other details.
You will also be asked to offer projections of 3 years of income and/or expenditures in a profit and loss format as well as cashflow planning.
Dentists who don’t enlist the help of a qualified business advisor may initially only work in their new practice one to three days per week with a full time receptionist or hygienist. You should factor in the work you will need to do outside of your practice in order to fill in the wage gap – and plan for it.
The price of developing building plans and renting equipment also need to be analyzed before lenders will review your application.
Our team of experienced dental practice accountants can prepare all of the necessary projections for you, and assist with your business planning. Contact Samera Business Advisors to receive current dental practice lender forecasts.
Improving your new dental practice
The interior design and equipment changes to your dental practice can be done over a period of months or years. These upgrades must be accounted for in your financial analysis and taken into consideration for many of your profit goals – as this process may disturb your production if not handled correctly.
If, at the outset of your purchase, you know that important equipment must be changed – you should also factor this number into your purchase price. Most sellers are very conscious that they’re practice may need a “face-lift” after years of dedicated service. It’s expected – so don’t be afraid to use this as a point of negotiation.
How long the process takes (really)
In short: establishing your new dental practice can take several months (in some cases up to 8) so it is imperative for you to remain patient.
This timeframe includes the completion of the following tasks:
- Your due diligence period, where you will review the premises and the obtain the appropriate planning permissions – which generally takes a couple of weeks.
- CQC approval must also be acquired in order to being operations once the transaction is completed
- Lenders will take 2-3 days to give you an outline of what they will lend. 5-8 days after you provide them with the requested information, they will usually give a you a full credit backed offer.
- A thorough dental practice valuation.
When buying your latest dental practice, you deserve the competent hands of seasoned professionals.
Contact Samera Business advisors today, so we can plan for your tomorrow.
For any assistance on raising finance for your first practice please visit here.
For help on setting up a squat practice, please visit here.