Large-scale lending for a new dentist in business for less than 18 monthsPublished on 19th September 2019 2019-09-19T11:00:00+00:00 - Last update on 30th September 2019 2019-09-30T16:17:04+00:00
A dentist recently took over an established dental practice in central Manchester. The practice was profitable - it had a long list of patients who would take an hour off work to come in for an appointment.
The position of the practice - close to the railway station and within easy reach of thousands of people in shops and offices - was one of the main strengths of the business. However,it was also becoming a problem - the surgery was up two flights of stairs in an older building with no lift, and there was no room for expansion, even though there was already clearly enough demand for a second chair.
There were also some complaints from patients about the heat in summer - and no possibility of bringing in air conditioning. Despite the demand for the dentist’s services, his premises were restricting the numbers of patients that he could treat, and the growth - and profits - that the practice could enjoy.
The dentist was keen to look at alternative premises nearby and when a new development just across the road was being marketed, he saw it presented the ideal opportunity for his practice. It was close enough to ensure that his patients would come with him, but it was in a new building that would offer a more comfortable environment and scope for expansion.
He could secure a suite on the first floor which would be ideal, and with air conditioning and a lift, it would be more convenient for patients as well as presenting more opportunities to grow the business.
By moving into the building as one of the first tenants, he could even lease the space he needed on very favourable terms. He would be paying out very little more for his new suite than he was in his current rooms.
However, there was a problem. The new suite was a raw shell. He would have to fit it out from the floor upwards, and it would make sense to bring in a second chair immediately.
With a total of £250,000 required to secure the lease, fit out the space and bring in the equipment he needed, he had a cash shortfall. With less than 18 months of trading, most lenders could not offer him funding.
He was ready to move his practice forward - but because he was still technically a new business according to many lenders criteria, he could not arrange the finance he needed.
Normally, a loan of £250,000 is easy to arrange for a dental practice. The sector is regarded as safe and reliable by most lenders. When a practice is profitable, and there is a clear business development need for the finance, a loan of this size should be straightforward.
However, many lenders will expect to see at least two years’ audited accounts before they will agree a loan of this scale. This is because they take the view that the business has not had time to prove it is profitable, and that it has the capacity to make the necessary monthly repayments. The dental practice had been serving Manchester for years - but because the new owner had been running it for less than 18 months, according to their criteria, the business had the same status as a start-up.
His practice was profitable, and his development plans were sound, but the lenders that he approached, including his own bank, would not recognise its value.
After trying brokers with no success, the dentist came to Rangewell. We can help - because we take a very different approach to the rest of the financial industry.
At Rangewell our service is personal and independent, which means we can find individual solutions when others can’t. Not only do we take an innovative approach, we work across the entire lending market - and we know lenders who are able to work with businesses when their circumstances fall outside the standard lending models.
We worked with the dentist to prepare a detailed business plan - similar to that required when a new business is looking for funding - but supported by real figures.
By approaching lenders we knew would be receptive with the plan and presenting the full picture about our client’s growth programme, we were able to find and arrange the loan required.
The costs were a little higher than might be secured by a business with a longer history of success, but were still very affordable.
Our client was able to move his business to his newly fitted out premises, and enjoyed an immediate increase in patient numbers. We arranged the loan with an important provision - the dentist will be able to repay early - and refinance at a more favourable rate when his second year of audited accounts are ready.
Naturally, we will be helping him get the most competitive deal with that as well.
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