How to Finance a Dental Practice

There are many reasons why you may be seeking a business loan for your dental practice. Whether you’re opening your first squat practice, looking to refinance to consolidate debt, buying a new practice, expanding your existing practice, investing in new equipment or requiring finance for another reason, you’ll need to work with a broker with access to the whole of market including specialist lenders to secure the best funding for your practice.

The dental industry has suffered in the wake of the Coronavirus pandemic. Pillars of the healthcare system, dentists went from busy waiting rooms to available for emergency only in spring 2020 following the UK government’s first lockdown. 

Despite the economic downturn brought on by the pandemic, dentistry is a much-needed service and, therefore, we expect the industry will gradually recover in 2022 and beyond. Even in current circumstances, the dental industry proves profitable with the UK ‘high street’ dental market is worth over £7bn in the UK. It’s clear that many dentists have turned attention to starting and growing their own ventures with just under half of that market figure representing private dental practices. 

Rangewell can help you finance your dental practice in whatever form it may take. We work with a wide market of lending experts and can help you understand the entire process from doing market research through to applying for funding, tailoring your application and business plans to suit the lender’s expectations. This can be crucial for those new to the world of finance as many lenders can be somewhat hesitant to invest in dentists who have yet to own their own practice. We’ll help you build a finance application that can win funding whether you’re buying your first practice, opening a squat practice or growing existing businesses. 

So, whether you already own a dental practice, you’re looking to finance an extension or another surgery, or you’re considering refinancing, then keep reading to learn everything you need to know about how to get a business loan for a dental practice.

Financing a squat dental practice

A squat dental practice is a small practice, often with a single surgery. This might be your first solo venture following a period in another private practice or in the NHS. While a squat practice in the right locale can prove profitable from the outset, there are a lot of challenges when setting up a new surgery in an established community. First of all, you will need to find the perfect location for your squat practice. Consider an up-and-coming residential area that doesn’t already have several established surgeries, for example, a commercial building near a new housing estate is a good option as there will be plenty of families living nearby. 

Remember, just because a location has strong footfall figures it doesn’t necessarily make it an ideal place for your squat surgery. For example, a train station or busy shopping street sees a lot of pedestrian traffic, but it isn’t necessarily the best place for a dental practice, particularly if parking is sparse. Every area is different, but it’s best to choose somewhere with a strong residential presence whereby you can nurture a dedicated client base. 

You will need a good idea about the ideal spot for your squat dental practice. Once you have found the premises for your practice, you will need to invest in equipment, either by way of purchasing or hiring. Dental equipment is expensive, so this is one area where business loans can help you get started as a dental practice owner. 

Even if you intend to be the principal dentist at the squat practice, then you will need support staff, including dental nurses and administrative staff. Recruitment is expensive and requires a consistent cash flow.

An orthodontist typically earns between £60,000-£80,000 a year, and even if you are the only practitioner, then you will need to keep in mind £18,000-£25,000 for dental nurses and extra for administrative staff. Therefore, you’ll need the right finance package to support at the start of your venture.

As a squat practice owner, you may not receive the most favourable finance terms, depending on your circumstances, own investment and experience as a business owner. Banks tend to favour larger interest rates to weigh their risk of investment in a squat practice. If you don’t have a large enough That’s why many squat dental practice owners will look to refinance once the surgery starts to turn a profit. With that in mind, let’s look closer at the subject of dental refinance.

Refinancing a dental practice

There are a number of reasons why you may consider refinancing your dental practice or group. Refinancing can help to release cash to invest across the business, such as growing an existing practice or buying new equipment. Struggling practices may opt to refinance as a means of debt consolidation, while growing groups may find better terms when refinancing following a profitable year. 

Refinancing a dental practice is a complex topic that warrants its own guide. We’ve created one on our website which details many of the main reasons you’d want to refinance your dental practice and the benefits, risks and more. Remember: just because a rate may seem better at first glance, you must always consider your working capital and the lifetime value of the loan. 

Growing a squat dental practice

As already mentioned above, a squat dental practice owner may want to move to a better finance product once the venture becomes profitable. Remember, lenders make decisions based on risk, and they will often see a high risk when it comes to a brand new practice. However, once you have a year or two of accounts under your belt, you will open doors to a wider range of loan products and even companies that may not have considered lending to you in the past. 

To ensure that your practice is in the best possible position when it comes to refinancing, be sure to keep an updated business plan that takes into account your short, mid and long term goals. For example, how do you plan to invest the new funding into the business? This might be the right time to expand your offering, extend your premises, hire another dentist, invest in new equipment or even acquire another practice. Each of those scenarios comes with its own risk, and the lender will have a system in place to determine this, but the quality of your application will make a significant difference to the products you are offered. 

At Rangewell, we work with you to compile a fully comprehensive finance application, so you can access the best possible finance products for your practice. Along with having access to whole of market finance, including specialist lenders, we know what questions lenders ask, and how they identify key risk factors. As a result, our expert consultants can prepare you for the application process and help to narrow down your funding options. 

Expanding from a squat practice

If you’ve started a squat dental practice and you’re now seeing profits, refinancing can be a good way to reduce the interest rates you were offered in your initial funding application. Squat dental practices typically see higher costs than traditional options and therefore refinancing may provide some welcome savings by reducing interest. 

Our full guide to starting a squat dental practice helps dentists understand the ins and outs of squat practices and helps you get started on your own venture. 

Refinancing for debt consolidation

Another reason why you may consider refinancing your dental practice is to consolidate debt. The last few years have been difficult for many industries, not least the dental market. Cash Flow is one of the biggest challenges faced by dentists, as many have equity tied up in property and equipment. 

You may consider a short-term solution like a bridging loan to release cash so you can get out of a difficult situation and continue to pay your necessary outgoings like rent and wages, but if you find yourself with several monthly payments then refinancing might be a better option to consolidate your debt.

Finance for underperforming dental practices

Considering that BDA analysis estimated taxable income for NHS England’s dental practices falling by 40% over the last decade, it’s no surprise that many dentists are seeing profits fall and practices begin to fail. Many practices are struggling with NHS demand and causing dentists to begin private practice to regain control of their finances and performance. 

All of that is to illustrate that if your dental practice is underperforming, you are not alone. There are several options available to you. As we’ve already discussed, you may opt to refinance so you can consolidate debt. However, if this is not an option or you require a different solution, then there may still be a way to get a business loan to support you through this difficult period.

For example, your dental practice or group may have suffered during the pandemic following several lockdowns impacting income. Paying salaries, renting property and equipment and continuing sales and marketing strategies all cost money, so while you need all of the above to save your practice, you may be struggling to find the cash to fund even the most basic outgoings. 

In cases like the above, we recommend you get in touch with the expert team at Rangewell to discuss your circumstances. We work with a number of specialist lenders to provide several different types of finance products, including short term bridging loans and long term loans. We support you to put together an application that highlights your strengths and explores your risks, so the lender can make the most informed decisions about which loans are available to you. Once we have a list of financing options, we will help you to determine which is the best for you, and if/when you can revisit the loans, an important consideration if you are taking out a short term product to help leverage the practice out of debt.

Expanding your existing practice

While some practices have struggled over the last few years, others are still seeing growth despite the economic downturn. You may be in the position to expand your practice, such as opening a second surgery within the same building and/or hiring another dentist to serve your client base. Some other patient-facing amenities could also increase your profits such as adding a car park or improving your waiting room. 

The UK cosmetic dentistry industry is worth over £3.3bn, presenting another significant opportunity for growing dental practices looking to expand their offering. Many more people are turning to cosmetic dentists to improve their teeth and smile, so you might consider taking a bite out of this growing market. For example, a funding injection could support you to open a dedicated cosmetic surgery to your practice. When it comes to private services like cosmetic dentistry, a strong marketing campaign and web presence are vital since the majority of your clients are in the millennial demographic.

Even if cosmetic dentistry isn’t for you, a second surgery within your existing practice will allow you to see twice as many patients. But getting set up with a second surgery requires significant investment, including the recruitment of another dentist and dental nurses, as well as the purchase and/or hire of vital equipment and increased rent if you don’t already have the room in your existing practice. In addition, some practices might need to seek even more funding for a second surgery as it will mean having to open a larger waiting area to accommodate the new patients. 

Whatever your future plans, a dental business loan could be just what you need to take that next step, grow your business and even boost your profits. Rangewell can help you secure the funding required to fuel your expansion and make your dental practice the best it can be. If you’d like to know more, you can contact us today or continue reading. 

Buying equipment 

Functional equipment is critical to the operation of your dental practice. From x-rays to dental chairs, computers, cabinetry and so much more. It’s not just the physical equipment that costs money, but also the software you need to run the business, such as client management software, project management tools and other important digital solutions that are absolutely paramount to the smooth running of any dental surgery. If you are an NHS practice, you will need equipment that is up to their standard and communicates with the weir NHS systems. Even a private practice must have the very best equipment to provide top-quality services to every client. 

As you will know, dental equipment is expensive. When you first start your dental practice, even if it is a small one-surgery squat practice, you’ll need to make a significant initial investment to ensure you are fit to serve your clients. Equipment is available to buy and rent. Both options come with their benefits, as buying means you don’t have to worry about ongoing payments but renting will reduce the initial cost at a critical time. Even if you buy the equipment outright, it’s important to keep money aside for ongoing maintenance, repairs and even in the case of needing to replace assets. 

Budgeting for dental equipment should be a significant part of your business plan, so you already have a good idea about how much it will cost and what you need to earn to maintain the equipment. When you work with Rangewell, we tap into the whole of market, including specialist dental finance lenders, so you can secure the funding you need to purchase brand new equipment or repair the vital technology that keeps your business running.

Using a finance broker for your dental practice

Approaching traditional banks to seek funding for any of these areas of dentistry can be a difficult and complicated process. Working with a broker means you’ll a team on your side who know the ins and outs of the market and can help you tailor your financial applications for each lender’s preferences and to suit your goals. 

Whatever your finance needs, come to Rangewell and we’ll help you to find the best business loans for your dental practice. Start your application today.