Finance for the private sector
Looking to buy or sell a private practice? Lucy Keeble discusses the current appetite from banks for lending to private practices
Each bank has its own criteria for lending and its own preference as to the type of client or practice it wishes to fund
The desire from dentists to own their own private practice, and banks’ willingness to provide the necessary funding to do so, shows no sign of abating. Despite not having the security of a guaranteed income derived from an NHS contract, over the past few years we have seen strong growth in demand for private practices, as well as many more dentists being keen to start up squat practices in the private sector.
At Henry Schein Financial Services, we deal with banks on a daily basis and see first-hand their perspective of the current market.
Each bank has its own criteria for lending and its own preference as to the type of client or practice it wishes to fund. The majority are more than willing to lend to dentists, but their offerings and terms vary widely depending on requirements; for example, one institution may offer a lower interest rate but require more security than another. However, what all banks need to see is that the profitability of the business is enough to repay the loan at the requested level over the agreed loan period and the funding proposal is clearly presented to ensure a positive response.
Banks no longer have a ‘one-size-fits-all policy’ when it comes to lending. Today it’s on a case-by-case basis, following guidelines rather than a rigid policy, which is a huge positive for buyers and sellers alike. We are seeing the market opening up to provide dentists with options that were not there in the past. The need for a deposit is also becoming more flexible, with banks considering the equity in a property rather than asking for a set amount upfront. In some cases, we are seeing deposits as low as 5% and 100% lending, even in the case of first-time buyers.
The appetite of banks for lending remains strong and we are seeing plenty of positivity in the market
What are banks looking for?
While freehold properties are considered by banks to provide more security against a loan, most are also happy to lend against leasehold premises, as long as the lease in question is of reasonable length. The bank will require full details of the buyer, looking for a minimum of two years’ experience of managing or being an associate in a UK practice.
As well as historical accounts for the practice, usually for the past three years, the bank will also want to see a business summary on how it is performing and the buyer’s plan for the future growth and direction of the business. This is something with which many buyers require support and often turn to us for professional help and guidance to meet the lender’s requirements.
Ensuring the best deal
The scope for lending on a practice purchase has many considerations and variables, so to secure the best deal available, it is recommended to use a specialist dental adviser that can navigate the best loan terms rather than approaching a bank directly. Henry Schein Financial Services works directly with heads of healthcare at appropriate banks that specialise in financing dental practices. This is something not normally found in a local high street branch, which can only offer standard business rates for a commercial mortgage, with interest rates well above those we can negotiate. Our rates are specific to the dental sector and are as low as 1.9% above the UK base rate in some cases, with both fixed and variable rates available.
Despite the current economic uncertainty, the banks’ appetite for lending remains strong and we are seeing plenty of positivity in the market.
Every dental practice is different, so when it comes to the complexities of buying or selling a practice it makes sense to enlist the help of a team of dedicated dental practice brokers to negotiate the terms that best suit your specific needs and budget.
With the one-to-one support of a financial adviser who understands the intricacies of the current market, you can ensure the most appropriate loan terms for your prospective practice purchase.