Are UK Banks Lending to the Dentistry Sector and Those Wishing to Buy a Dental Practice?
Thinking of buying a dental practice?
Those who are thinking about purchasing a dental practice in the UK, especially first time buyers but also including current practice owners, regularly ask the question, “are the banks favourably inclined towards lending for the purpose of buying a dental practice in the UK?"
Whilst it may be true that most forms of funding are more difficult to obtain than was the case pre-recession it is nonetheless true that banks are, in fact, quite happy to lend for the purpose of private, NHS and indeed mixed fee practices.
What’s more, there are hard facts to back this up - in the last 12 months alone one leading UK dental practice broker, FT&A Finance submitted over 240 separate funding proposals to various banks with a combined total borrowing requirement in excess of £115m. Of these, more than 94% were approved by at least one lender. Over 50% of those were for the purchase of private practices.
A green light for dental practice purchase
It is well enough known that the Uk’s banks have an edict from the government to improve their lending record with businesses, especially small and medium enterprises. Dental practices are considered to be within this sector. It is true that results are mixed and some businesses still report difficulties in obtaining funding but this most definitely has not, and does not, apply to the dentistry sector.
In fact, there are now some 12 high Street banks that will actually lend against Dental goodwill as part of the overall package when lending for a dental practice purchase.
What about buying dental practices based in leasehold property?
It is a common misunderstanding that banks are only interested in lending for the purpose of buying a dental practice if it includes freehold property. This, however, is simply not the case.
Most banks are quite happy to lend to those wishing to buy a dental practice which is in a leasehold property so long as there is a reasonable term remaining on the lease. The reason for this is simple enough - if the outstanding lease were too short then the term of the loan would have to be equally short thereby rendering the monthly payments unaffordable.
It would therefore be good practice to limit your search for a dental practice for sale which has a minimum of 10 years unexpired and 15-20 years would certainly be preferable.
It’s really a matter of presentation
It’s always worth bearing in mind that banks, like any other business, vary from one to another. What one bank might decline, another would accept. Each bank has its own lending criteria as to the type of business that they wish to be involved with.
It’s often the case that decisions can actually be influenced to quite a large extent by the way in which a proposal is presented.
A well argued and presented request for finance will always meet with a better response than one which has been cobbled together and which does not present the merits of the proposal in the most favourable light.
For this reason it is fa better to utilise the services of a finance broker who specialises in obtaining finance for the purchase of a dental practice.
Everybody’s different - even bank managers
Finding the right bank manager is, in fact, as important as finding the right bank. If you are thinking of buying a dental practice. Not all bank managers will have sufficient understanding of the dental profession and how it works to enable them to make an informed lending decision.
There are many examples of cases where an identical proposal has been submitted t different managers within the same bank and met with different decisions.
In reality, you will probably not get the funding you require at the first attempt, it i a case of finding the right bank and the right bank manager to consider your application. If you own a dental practice already and wish to purchase another your current lender may not approve the additional funding.
In some cases the lender may approve the request but insist on “re-pricing” the whole borrowing, in an upwards direction of course.
A blueprint for success
You would be forgiven for thinking that it may be quite a challenge to obtain funding to buy a dental practice and you would be right. the answer lies in securing the right help in order to give your request the best chance of succeeding.
A good starting point would be to enlist the services of an independent adviser. Your chosen adviser must have access to approach the whole of the market and should know the lending criteria of each individual bank in considerable depth. He should also be aware of best bank managers to approach with your proposal.
An independent advisor will be able to customise your application and prepare a business plan with P&L projections in order to to ensure that you have the best chance of a obtaining a positive lending decision.
The best decision on the best terms
It isn’t just a matter of obtaining a”yes” when applying for finance to buy a dental practice. It is also important to secure the funding at the right price. The repayments must be affordable and realistic.
In order to make sure of this, before you even speak to a bank, contact a specialist Dental Adviser who will carry out an assessment of your proposal, provide you with expert guidance as to how to format your application for optimum results and also give you an idea of the pricing that is likely to be involved.
It has been proven time and time again that a well presented and clear funding request to a bank will result in you obtaining the finance on much better terms when compared to you approaching a bank direct.
Although banks will certainly look to maximise their returns, with the support of an independent adviser working on your behalf, the banks should offer the most attractive terms they can in order to secure your business.
Obtaining funding to purchase a dental practice may seem to be a daunting process but bear in mind that the banks actually do want to lend to you – indeed the Government are constantly reminding them that they must lend more to businesses so you are in fact, in a very strong position, especially with the banks now actively competing for your business.