Cutting the cost of finance for a dental practice
Buying into your first practice
Setting up any first business is challenging but, at Rangewell, we helped a dentist become a practice owner for the first time with a package of funding to cover the £535,000 business purchase - despite issues making it difficult to secure funds.
As a dental professional, you know that the rewards your professional clinical skills really deserve can only come if you operate your own dental practice, and ensuring that it is you who will reap the rewards of your hard work and dedication.
But what is the best way to becoming a practice owner?
The UK is already well supplied with dentists and it may be difficult for a new practice to establish itself. What’s more, it usually takes two to three years to grow big enough to make a profit and, even then as a single dentist, profits will be low - perhaps not more than £50,000. The hours will be long and you will not be able to afford a junior while you build up a list of patients.
The alternative is to buy an existing practice. Not only does this avoid the costs of setting up - finding premises, getting planning permission, bringing in equipment - but it means walking into a business that is profitable from day one and with a list of patients and appointments ready for you to treat.
The costs involved in the purchase of a profitable existing practice outright or even as a partnership are high, but the risks - compared with the uncertainties of setting up a squat practice - are greatly reduced. Buying a business with an established customer base is always less of a risk than stepping into the unknown.
Naturally, as a dental professional, many lenders will be prepared to make a high level of funding available to you. But with large sums involved, getting the most cost-effective solution for your needs is all the more important. If you are setting up your own practice for the first time, these challenges can be daunting. Finding the most cost-effective ways to provide the funds you need can be essential to your success because repayments that are too high will eat into your profits.
We recently helped arrange £53,000 funding to help a young dentist buy into a practice - despite an additional challenge.
First business steps
Our client was a young dentist who had been working for several years as a junior in a large practice. Armed with practical experience, he was ready to buy a practice of his own.
He found what looked to be a suitable practice for sale in a town close to his home. The practice had been set up and operated for several years by a husband and wife dentist team. There was a good patient list and the practice itself was the classic dental surgery - a small suite above shops in a busy high street.
“It was an ideal small, typical, independent dental practice. The equipment was all in good condition, the location was good, and there was a good-sized waiting room, a comfortable treatment room - but most important of all there was a long list of patients.”
It looked as though the valuation of the practice was fair. There was plenty of scope for the practice to take on more patients and to offer specialised treatments to increase income. Lenders are usually supportive of dentists looking to buy a practice, seeing them as low-risk and their businesses as highly profitable.
But it soon became apparent that there was a problem
“When I went to the bank, they told me that a commercial mortgage secured on the premises was the best way to raise the money I needed - but they wanted life assurance to cover the loan if anything happened to me. I thought that it would be routine - but with Covid in full swing, life insurance providers were simply not issuing policies. And no life cover meant no mortgage.”
It was the same story with other lenders. The dentist realised that expert help was going to be required and called us at Rangewell.
We looked at the problems:
- Covid had changed how a dental practice was run and it was harder to operate profitably during lockdown
- The reluctance of insurers to issue new policies might make it impossible to provide the security required for a loan of close to half a million pounds
- Lenders are often wary of first-time business owners, despite the dentist’s professional experience. Most lenders will take the view that this is a risk - with no history of profits from a practice of his own under his control, they have no indication that his new venture would be a success, especially in view of the downturn shown on recent accounts.
However, we have a number of experts in funding for the dental sector and not only did they understand the problems immediately, but they also set about finding solutions. We began by approaching our contacts at a number of banks who have been receptive to proposals from the dental market in the past, but the response was still negative.
We saw that our client was in danger of missing out on buying the business he wanted. However, our understanding of the dental sector made us realise that this problem would be affecting other dentists needing to look at funding.
We then used our contacts across the entire financial sector to find life insurance providers who were able to provide the cover required - and then approached the banks again - this time securing the funds required.
The funding that Rangewell arranged
£500,000 at 2.5% above base rate over 15 years
How can we help you?
At Rangewell, we do our best to find the type of funding that you need and which fits your business plans, even when those plans look close to being derailed.
Because we are independent and can take an entrepreneurial approach to the business of lending, we can frequently help find answers to funding challenges when going direct to lenders will not.
We can also call on the experience of our team of business finance experts to develop innovative solutions and to put those solutions to work.
With our experience of the entire lending market, it means we can find the funding you need - whatever your business challenge.