How much can I raise?
It is still a surprise to me that many borrowers are not aware of how much they can raise when seeking finance for a project.
In most cases, potential borrowers underestimate what they can raise and therefore what they can purchase.
When looking at buying a dental practice the amount you can borrow is often linked to a number of things and lenders (Banks) all have different policies/limits /requirements.
Who am I dealing with?
It is very important to ensure that you are dealing with a lender who has experience and knowledge of the dental market. Many bankers are “generalists” and deal with many types of businesses. Several lenders have set up specialist Healthcare teams staffed with knowledgeable staff who can assess your application in the correct way.
These specialist teams are rarely located in branches and their experience as you would expect varies with how long they have been with the team.
So what determines what I can borrow?
Bank Policy determines this and this can vary as to:-
Lending an amount per dentist for each transaction
Lending a percentage of the goodwill valuation
Lending a percentage of the goodwill valuation plus lending against security
Sometimes lenders vary the amount they will lend according to where you are in the UK
Your experience – lenders require between 3 and 5 years minimum
Some borrowers restrict the term of the loan to 10 years others to 15 years
If you are setting up a squat (start-up) then 70% finance may be available
What does this mean in terms of amount?
If you take a figure of 70% -80% as a guide for purchasing an NHS or private practice this will give you a good idea of what can be achieved.
However, loans can be available for up to 95% with security
Before everyone goes off to look at that million-pound practice there are some basics to remember.
Loans must be affordable, the EBITDA of a business (Earnings before interest, tax, depreciation and amortisation) will demonstrate whether a business can afford to support a borrowing. You will need to have cash available for a deposit, solicitor’s costs and fees that lenders charge.
You may need to look at how the business will perform in the future with you as the owner, will you keep on the seller/associates/what new services will you introduce/what will you change? Lenders may require projections.
How to navigate this finance maze
You could contact your own bank and see if they can assist but take into account all the differences would that be the right structure and cist for you?
Could you get a better deal elsewhere – remember this is going to be for 15 years.
With all the differences in pricing/fees/terms/commitment periods and early repayment penalties, it is best to shop around.
So why use a broker?
We will assess your own situation as an individual case, we will approach several lenders who we believe using our experience and knowledge can help you.
We will obtain offers of finance for you from several sources so that you can compare the offers and decide which is best for you and your business.
We will negotiate on your behalf to get the best price for you and liaise with the lender through the process of due diligence/valuation/taking of security and any other requirements they may have.
You will have us by your side throughout the process utilising 38 years of banking experience and the knowledge of us having completed so many deals in that time.
We will make sure that you see that is available across the market.
If you have any questions please call me 07715 668267 or email me at email@example.com