Goodwill loans, also known as capital withdrawal loans or "cashouts", are a way of accessing the value in your business without withdrawing funds and to help you avoid causing potential cash flow difficulties for your business or significant tax liabilities for yourself.
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A dental practice can be a highly profitable venture. Aside from the obvious financial value in your practice, there are other intangible assets to consider like your patient base, reputation, professional status and other relationships. It's these aspects of your business that can be hard to quantify, especially when it comes to seeking finance for your dental practice. However, lenders can be made to recognise this 'goodwill' value and lend against it.
Table of Contents
UNLOCK THE VALUE IN YOUR CURRENT DENTAL PRACTICE TO....
Expand and increase the number of surgeries
Relocate to Larger Premises
Open a Second Location
Diversify into Advanced Dental Services
Pay Outstanding Tax Bills
Buy Out a Partner
Extract Capital for Property Investment
Refinance Expensive Asset Finance Loans
Withdrawing funds from your business to buy dental equipment, invest in a new practice or even just ease cash flow difficulties can be difficult. Dentists with successful practices can leverage the 'goodwill;' built up in a practice in order to take on a finance loan that helps you grow without risking assets as security.
Financing can help you make important moves in your business journey - whether that's buying out a competitor, recruiting new staff or expanding your premises. Provided you run a profitable dental practice, you can use your practice's status to unlock additional funds and support the next step in your journey. Get in touch with Rangewell to start your goodwill loan application today.
What is a dental practice goodwill loan?
A goodwill loan, also known as a capital withdrawal loan or a “cash-out”, is a common way to finance a dental practice. It can let you access the value in your practice without withdrawing funds from it. It works by allowing you to use goodwill built up in practice as the security for a loan, which you can use for a wide range of purposes.
The benefits of this type of financing include:
- Access large amounts of funding
- Spread loans over a long period of time
- Avoid using property or assets as security
- Flexible repayment terms
- Opportunity to combine with jigsaw funding
- Available to smaller practices, such as squat dental practices, given you have a good track record
Why use this loan option?
This type of finance is offered by securing the funds against the value of the future of your business. It can bring you a sum comparable to your annual turnover, typically between £50,000 and £500,000, with repayment terms of up to 15 years.
This loan frees up any pressure on your existing cash flow or capital reserves and helps you raise additional cash to fund growth. Dental practice owners use them for a range of things, including buying their premises and freehold to secure a long-term asset, invest in new dental technologies to grow your service offering or develop a new cosmetic dental offering.
To find out whether you qualify for a dental practice loan, or explore other funding opportunities for your dental practice, speak to Rangewell's expert advisors today. We work with dentists all over the country to find and secure finance to suit them.
How can you best utilise a practice loan?
Goodwill, or practice finance loans, are not restricted to what you can spend them on. So, however you are running your dental practice, you will have unique business goals that you are working to attain - and goodwill finance can help to turn these into a reality.
Common ways in which dental practices can spend a goodwill loan include:
Expand your business and open new surgeries
If your practice has been growing successfully and is generating profits, some entrepreneurial owners will choose to expand their business by establishing a new surgery. In most cases, you can buy an existing practice from an active competitor or a retiring dentist.
Sometimes, however, you may instead choose to develop a new practice in an area that lacks competition and has high patient demand. To do that, you'll need to fund the acquisition of a suitable property, any necessary conversion work and outfitting the practice.
Whichever route you opt for, there are high costs when opening a new dental practice, which a practice loan can help you fund, all without risking personal assets.
Establish new dental services
Dental practices tend to focus on core services until they have the funds required to focus on specialist treatments. Cosmetic dental surgery, for example, is growing in popularity in the UK but requires a staff member with the right experience and niche equipment built for the service.
Unlocking your practice value loan means accessing a new pot of cash you can use to fund new services. You should include the potential value of the services in your business plan and in discussions with lenders, as it will help improve your loan's terms and convince lenders you are making a profitable decision.
Extract capital for investment
A goodwill loan allows you to extract cash from your practice by giving you a lump sum that can be repaid over a number of years. These repayments, ideally, can be made by the cash you generate as profit whilst running your business - which means you'll be able to get instant access to capital that would otherwise remain locked within the business over a long-term period.
Some owners choose to use this loan to fuel practice growth, whilst others instead extract the capital to reinvest it elsewhere. This could be to purchase the premises you currently operate from or another property investment. You'll need to approach your discussions with lenders carefully to ensure you can get maximum value, so talk to our team before you proceed.
Refinance existing loans
Dentists with previous finance agreements may benefit from a refinancing strategy, which often focuses on refinancing expensive asset finance loans you've taken out on specialist equipment. Some lenders can refinance existing loans in addition to granting a goodwill loan, whilst in some scenarios, it can be better to instead extract the cash, pay off the asset and then streamline repayments to a single channel in your goodwill loan lender.
Buy out a partner
If your practice has been performing well, buying out a partner can be expensive, with their shares carrying considerable value. If a partner is approaching retirement age or wants to move on from the business, buying them out usually means raising finance in order to do so.
A goodwill loan taken against the value of the practice can be used to buy out a partner, but you should ideally speak to our team first to discuss your plans. We can help guide you on the financial considerations of a buy-out, including evaluating the value of your partner's shares. Talk to our team to see which type of finance will facilitate the best buy-out deal.
Other uses for a practice loan
There are a few limits on what you can do with your loan. For example, you can’t use it to pay off your mortgage on your primary home. A goodwill practice loan can give you a great deal of extra spending power while letting your dental practice retain the funds it needs to operate and grow.
And when you work with Rangewell, it’s easy and fast to arrange. The lender will need to review your accounts for the last few years to make a decision. Interest rates will be agreed upon when the loan is taken out. Although they will be variable, they are likely to remain significantly more favourable than other lending types.
Practice loans can be arranged at short notice, and there is no need to provide any deposit or additional security.
At Rangewell, we have already helped many dentists enjoy the financial benefits of their hard work with goodwill loans. Our expert advisors can explain the potential of this type of lending and help you approach the most suitable lenders. Get in touch today to find out more about the different types of dental practice finance available.
Last update: 30 June 2023
Frequently asked questions
Have a question?
Every dental practice will have goodwill. Goodwill refers to the intangible assets that either restrict or enhance the practice's future earnings, including patient charts, recall systems, staff longevity, non-compete covenants, and the owner's reputation within the industry. Goodwill will typically account for 60% to 0% of the practice's total value. Therefore, for both buyers and sellers, protecting goodwill is critical throughout the transition process.
The main issue is that intangible assets will change in value. Therefore banks will not lend against them. Expert goodwill brokers such as Rangewell can provide you with everything you need to gain a better understanding of goodwill lending.
We'd recommend you work with a goodwill mortgage broker - they can provide you with bespoke deals that banks may not be able to offer. A goodwill loan can be an important additional asset for your personal financial plans, and give you a great deal of extra spending power.
At Rangewell, we have helped a wide range of professional people use Goodwill Loans. We can explain the potential of this type of lending, assess your practice for suitability, and help you approach the most suitable lenders to create tailored packages to suit your business needs.
When you call us, we can explain the options – and find you the most competitive solutions which will bring you the funds you want.
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