Using a Broker to Secure Dental Practice Finance

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Home » Healthcare Finance » Using a Broker to Secure Dental Practice Finance

The process of applying for Finance to buy a Dental Practice made simple by using a specialist broker

Using a broker to secure your dental practice finance loan can come with many benefits. Here we will cover the process of applying to finance to buy a practice.

Funding your dental practice

Commercial finance lenders typically have a good appetite around funding healthcare transactions. Especially finance for a dental practice – both the goodwill and the freehold.

To help support your dental practice purchase, we are a specialist independent broker, meaning we are able to source finance from a panel of lenders. This means, through experience and our relationships, we can find you the best available deal to finance the purchase of your dental practice. We’ve been involved in many practice purchases and refinances all around the UK, from first time buyers to experienced business owners expanding their group.

How much can I borrow on a loan to buy a dental practice?

As a practice finance broker, this is quite a common question, especially with first time buyers. The short answer is that every dental practice is different. It is not like buying a house where your personal income drives affordability. When purchasing the goodwill of a dental practice business, it is the dental practice itself that will drive the debt serviceability – which is fancy talk for saying – is this dental practice making enough profit to be able to afford to pay the repayments on the loan. So the only way we can establish if we can finance the purchase of a dental practice is once we have access to the company accounts along with the full financial detail of the client that wants to buy it.

New Client Onboarding

We always start with a simple client fact find, that covers all your basic info, income, expenditure, assets and liabilities. All practice finance lenders want to see this right form the outset with any initial enquiry. You can complete this in your own time if easier. This helps to establish the clear financial picture of a person looking to finance a dental practice purchase. Remember, we're here to help you. Pulling together clear information at the start makes the whole process much easier and faster moving forwards, no matter which dental practice you ultimately end up buying.

Pre Offer Enquiry

Once you find a dental practice that you want to purchase, we can discuss an initial proposition with the lenders to see if they feel it would be something they could consider.

As your broker, we can put together a case that covers the current status of the practice, and the plan to take that business forward. We will then tender your application to the lenders, along with the other supporting documents that are needed to secure the practice finance (see below), and secure the most competitive terms. Having this knowledge provides the buyer with some confidence when going to view a practice.

Once the lender has completed their initial review of the case, assuming they have the appetite to support the purchase, they can issue the 'Indicative Terms'.

What are 'Indicative Terms'?
Indicative terms are a summary of the proposition from the lender and typically summarises:
- Loan amount
- Term of the loan
- Fees
- Interest rate
- Early Repayment Charges (ERC) if applicable

You can compare the indicative terms stage of the process to be similar to that of a decision in principle when buying a house. However, one main difference is that there is no credit check done at this stage. With commercial finance, the credit search is typically done as part of the full application for finance

Offer Accepted

Once you have an offer accepted, we will help guide you through the full application. At this stage we sometimes have a remote meeting together with the lender to go over their process, any further requirements the lender may have, and establish some times scales moving forwards.

Once the application has been 'underwritten' by the lender's credit team, you should receive and offer of finance, subject to a satisfactory valuation of the business you wish to buy.

Supporting You Until Completion

We fully appreciate that buying a practice is a huge step, and no doubt quite daunting. Especially when you also include applying for finance at the same time. But that's why we will be there to support you all the way through to the day of completion as your specialist dental practice finance broker.

Fifty Nine Financial - your Dental Practice Finance Broker

5 Star Service

We base everything we do around delivering excellent service and building relationships with our clients. Ultimately, we want you to come back to us time and time again. Our service standards help us to achieve this. Read our reviews from other Dentists.

Established Relationships

When it comes to getting deals over the line, a strong working relationship between your broker and the people making the decision goes a long way. Knowing the right solution so we're not wasting time and getting things done once you have found the practice you want.

Full Menu Of Services

We are directly authorised with the FCA. This means, as well as your commercial funding requirements, we are also brokers for many other financial service needs. Such as personal mortgages and insurances. Something a lot of commercial brokers can't do.

In House Insurance Advice

Most commercial loan offers stipulate that you protect that debt with a life insurance policy. As we are also FCA regulated insurance brokers, it means you don't have to go elsewhere. We can arrange it all for you.

Dental Practice Finance - important considerations

Term Of The Loan

There are many factors that can influence the term of the loan. Affordability will play a part. As a general rule, the term on a commercial loan to buy a practice will be 15 years for the goodwill. It's important to note if this is a leasehold practice the term of the loan will likely be restricted by the remaining term of the lease. However, if you are also looking to buy the building, the freehold loan can typically be taken over a longer term of 20 - 25 years.

Loan To Value (LTV)

Healthcare is regarded a solid sector when it comes to commercial finance. For this reason there is typically a strong appetite to lend in this area, especially for dentists.

Depending on the structure of the deal, any additional security etc, LTV will vary. But when financing the purchase of a dental practice is is not impossible to achieve 100% loan to value, if the deal can be structured in a way that makes the lender happy. This may not be the case for a first time buyer. But for clients that have a strong existing dental practices(s), it is often possible to 'gear up' against the value of that existing business to minimise the deposit requirements of the new purchase. Assuming there is 'equity' in the value of the existing practice vs any outstanding debt.

Affordability

In simple terms, ‘affordability’ or 'serviceability' refers to the ability to make repayments on a loan. This is, of course, established on a case by case basis. A lender will most likely want to see that an applicant can afford to live comfortably when factoring in the cost of the repayments, so that they are minimising the chance of financial distress further down the line.

Specialist Lenders

Every bank or funder has their own criteria and preferable industry sector when it comes to lending. That's why it is important to know which lenders favour supporting dentists and ideally have a specialist Healthcare team. Our own established relationships with these lenders can play a big part in the outcome of any application and the terms of any deals. This is one of the key values of using a broker that specialises in dental practice finance.

Revolving Credit Facility (RCF)

Accelerate Growth with a Revolving Credit Facility

A Revolving Credit Facility (RCF) is a pre-agreed pot of cash that can enable you in fast track any growth aspirations. This is typically agreed based on a multiple of your group's total EBITDA. Therefore, an RCF is typically something you may be able to access once as you start to grow. These are not available to first-time-buyers. An Revolving Credit Facility may appear hard to find as there are few lenders in the market that actively offering this type of facility. However, an RCF is absolutely possible to the right customers and is typically driven by your groups EBITDA. Thanks to our excellent relationships with lenders, we are able to secure this type of facility for group owners who are looking to grow fast.

What documents will I need to provide?

With any healthcare finance application, initially we will typically need:

- ID
- Completed personal fact find with assets & liabilities info - we will provide you with our template
- CV detailing your experience in the relevant sector
- Last 3 years finalised accounts for the business you want to buy
- Current year to date management account information for the business you want to buy
- Evidence of deposit funds, typically 3 months bank statements

If you already own a practice(s), we will also require:

- Last 3 years finalised accounts for your existing companies
- Current year to date management account information for your existing companies

There may be a requirement for further document or information. The earlier you provide the things mentioned above, the faster we can get indicative terms. This then enables you to move forward with any offer / purchase.

Summary

Pulling together documents and filling out a Fact Find can sometimes feel like a chore. However, we pride ourselves in delivering excellent outcomes to our clients. Not simply dangling a carrot of expectation. Therefore, making a little bit of effort at the beginning of the journey can help a lot. This ensures we have an much important information as possible can make all the difference once we get into the nitty gritty of an application for finance to buy a dental practice.