One of the most important skills in your personal and business life is learning how to manage your finances. If you can manage this skill well, you will then be on the path to obtain finance and business loans to buy a dental practice.
When you are seeking a loan to buy dental practices, banks and lenders will look at your personal finance history to help them ascertain whether you will be a secure and reliable client that can repay the loan.
If you do not own a dental practice, your personal circumstances are one of the information sources that lenders will have to assess your ability to manage a dental practice when you acquire one. They will also look at your CV and whether you have undertaken any roles in your current dental practice to gain skills such as management of staff, involvement with premises issues and the CQC.
Up to this point in your life, managing your own personal finances have been just for you and your family, with little scrutiny from others.
To get the finance and business loans required to buy a dental practice will require some effort to convince a lender you are worthy of the finance.
So how do you get a business loan to purchase a dental practice?
There are a number of banks and lenders out there looking to help you purchase your first dental practice. They all have their own policies and limitations as to whom they will lend to and how much they will lend.
Most lend on an unsecured basis up to a certain level and therefore will want to be sure that you have the skills and the financial ability to repay them when you buy a dental practice.
When you approach lenders for finance they will want to see a breakdown of your current personal assets and liabilities and how you currently spend your income. They will also review how much you have been able to save, and if you have not saved, they will ask where has the money gone.
They will be looking to see if you have invested in property/qualifications/assets.
This is a detailed examination of your income and expenditure and will need to be supported by the provision of bank statements verifying what you have put down as your income and expenditure.
Your bank statements also show how you have conducted your bank account. Many lenders ask for six month’s bank statements to see your income as a Dental Associate.
They also look at how you control your funds, and whether you overdraw your account on a regular basis. In addition, they will also want to see three years associate accounts again to verify your historical income.
Most of the lending for the first purchase of a practice is unsecured, so understandably lenders want to be sure you have a sound financial background and can control your own finances. They want to see a good degree of financial sense and control which will be needed to manage your own dental practice.
Good sense of Financial Control
Banks and lenders will want to see that you have demonstrated a good sense of financial control before they offer you a loan. Having some savings for a deposit, or an investment property and investment in your professional skills provides a level of comfort to banks.
This along with a well-run and controlled bank account all start to build a picture for lenders to enable them to consider your request for a loan and leads to a good credit score.
Don’t buy a new Jaguar annually!
So, buying a new Jaguar every year, running up large credit card debts and showing a large surplus of income over expenditure with no visible savings is not the way to go. If you constantly overdraw your account with no overdraft limit in place this indicates no control of your spending.
Having a bank overdraft limit in place is not a bad thing, it demonstrates the ability to plan and foresee pinch points in your finances and the financial skill to deal with this in advance.
This is not to say you cannot buy a nice car and have good holidays and send your children to private school. It just all must be managed in the correct way.
Avoid Credit Card Funding
Professional courses and school fees should not be funded on a credit card, banks like to see that you have used appropriate loan facilities to fund such activity indicating to them your financial acumen.
If surplus income has been spent on something considered good such as further professional qualifications/property investment, make sure you highlight this to the lenders as this is not always clear from bank statements where it may merely show a loan payment.
Planning for Tax Liabilities
It is important you keep up to date on all your tax payments too. When applying for your financing for your dental practice purchase, they will always ask for confirmation that your tax payments are up to date, or you have made sufficient provision for them.
When to apply for financing or a loan for your dental practice acquisition
Your financial standing is measured at a particular moment in time, the moment you are applying for a loan. Banks will look at your position, now and scrutinise your situation over the previous 6-12 months.
You cannot change your lifestyle in a week and you cannot change what is showing on your credit history or bank statements, so you need to prepare and plan.
Before you apply for the loan, it is imperative you have your house in order, show good management and financial acumen which will only improve the likelihood of you obtaining a competitive loan for your dental practice acquisition.
How do I plan for this? 5 Steps
The most obvious statement is to live within your means. A quote from Charles Dickens – Mr Micawber
“Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
Step 1: Review your personal income and expenditure
It does all looks very easy but we all know that life is not the simple and that life throws up things to make our plans go off course, such as house purchase, children and health problems
The first step is to review your personal income and expenditure – look at it from an outside perspective, and consider what would others think when looking at your expenditure.
Would an outsider consider the £2000 per month you put aside for holidays excessive or, just right?
Or the loan repayment figure you are showing at £1200 per month what does it relate to?
Make sure there is a breakdown somewhere showing what it is made of. Is it all a car loan or made up of some car loan and some professional qualification costs?
Step 2: Obtain your Bank statements and look at your account conduct
The second step is to obtain your bank statements and look at your bank account conduct. Do you stay in credit or within the overdraft limit? Are there any times when your finances get really stretched, and if so, can you do anything about this?
Step 3: Obtain your Credit Score
Thirdly, obtain your credit score for free and make sure that it is correct. Check there is nothing on there you were not aware of as credit scoring companies do often make mistakes. If you use multiple credit cards consider reducing the number of cards as having many credit cards can lower your credit score.
Step 4: Consider your partner’s financial background
Make sure your partner’s financial health is strong too. If borrowing in joint names you will both have an examination of your financial status.
Step 5: Use an experienced Commercial Finance Broker
Utilise the skills of an experienced commercial finance broker such as Samera to help you raise the finance. Our team are experts in helping dentists get finance and business loans for their practice acquisition.
Our experts will be able to guide you through the process to ensure you put in the strongest application to the banks and lenders to obtain the best available deals on the market.
Our finance brokerage team can advise you at every stage of your application to ensure you understand the process and don’t fall into the many potential pitfalls when raising finance for your dental practice purchase.
To help you raise finance for your dental practice acquisition we charge a modest fee, only payable on completion of the purchase.
Three important points when Raising Finance to purchase a dental practice
- Review your finances early on, not when you want to purchase a practice. Ensure that you look at these critically and obtain an outside view, if possible, our team perform this at no charge.
- Make sure you are in financial control, provide explanations for existing debts and any large expenditure items. Make sure your CV is up to date and it includes all your professional skills, as this will be read by bankers, not dentists, so make sure you explain any technical phrases.
- Make sure all forms are completed fully as lenders check bank statements, accounts and business loans with credit reference agencies. So make sure everything is disclosed as this will ease the process and remove the need for further questions and explanations.
If you follow the points detailed above, you will be able to raise finance and business loans to buy a dental practice.
Frequently Asked Questions on Finance and Business Loans to buy a Dental Practice
For further information please visit our Frequently Asked Questions on Raising Finance.
For further information, please contact the Samera team.