How To Finance A Dental Practice In The Uk

Buying, starting, or expanding a dental practice can be a substantial investment. There are different stages when dentists may require significant capital to invest in their practice, from buying goodwill and property to upgrading equipment and managing working capital. Knowing your options can help you plan your finances and choose the best funding structure for you.

When funding a dental practice, the first thing you need to know is how much you will need and what it will be used for. The next is what the lender will be looking at when you apply.

Assess Your Dental Practice Finance Requirements

Figure out how much you need to borrow before you go to the lenders. The amount required will be dependent upon your plans. For instance, an established practice may need to be purchased using acquisition finance for the goodwill, and commercial property finance for the freehold.

Other costs may include equipment, refurbishment, technology, professional fees, staff training and working capital. It will be useful to make a comprehensive list of the expected costs, so you know the amount of funding required and can avoid unforeseen expenses.

Explore Available Finance Options

There are various forms of dental practice finance in the UK and the right choice depends on your situation.

Acquisition finance is commonly used when purchasing an existing dental practice.

Asset finance can help fund equipment such as dental chairs, imaging systems and other essential technology.

Commercial property finance may be suitable if you are purchasing the building in which the practice operates.

Prepare Your Financial Information

Lenders are primarily interested in your financial ability and your capacity to afford the loan amount. If you already have a practice, they will check accounts, profit and loss statements and cash flow.

In the case of a new acquisition, lenders may also take into account your professional and management background, personal income and spending, existing obligations, savings and credit history. Documents to present include tax records, financial statements, bank statements and a detailed business plan.

Evaluate the Practice Before Borrowing

When buying a practice, do not base your borrowing decision solely on the asking price. Assess the financial performance of the practice and the ability to pay the proposed repayments.

The financial side of the due diligence process can reveal if the numbers on the seller's books are accurate and reflect the true business. The patient numbers, income from the NHS, private patients, staffing costs, profits and future growth of the practice can all have an impact on a financial assessment.

Compare Lenders and Loan Terms

Consider comparing offers, and pay attention to the interest rates when searching for the lenders. Take into account the term of the loan, the loan-to-value ratio (LTV), arrangement fees, security, repayment plan and any other fees that might be involved.

A specialist dental finance broker can also help in understanding the available options and present your application to suitable lenders.

Plan Your Repayments Carefully

Securing funding is just one part of financing a dental practice. It's also important to think about the cash flow that you would have in the future. Make realistic budgets for revenue and expenses and leave some ‘wiggle room’ for unforeseen expenses.

From stepping your first time into a practice, to expanding an existing practice or purchasing new equipment, planning can help you determine a funding structure that enables you to meet your financial situation and long-term goals.