Dental Practice Finance

Frequently Asked Questions

Does a Bank expect me to have management experience before buying my first practice?

First time operators can equip themselves for practice ownership by taking unit or mini-team  management roles for other operators – training courses can also help build a case for first time buyer applicants. We can advise on bringing out these important areas in your CV 

How many years clinical experience will I need to qualify for a Bank loan?

Successful applicants will usually have a minimum of 3 years post qualification clinical experience but if the borrower is supported by an experienced clinical and professional advisory team and a strong investment then some lenders will take into consideration.  Let’s discuss your individual circumstances

Is finance available for a start-up dental practice?

It is possible to obtain finance for the purchase of premises, internal build, fitting out and equipping of a new dental business but the number of lenders is quite limited and a strong business case has to be prepared. We have experience of supporting clients through this process so please do talk to us at the earliest possible opportunity if you are considering a ‘squat’ project.  

Are Banks more likely to lend if I am purchasing a freehold business?

Banks will lend on both freehold and leasehold dental businesses subject to the sustainable EBITDA being sufficient to fund the additional costs of purchasing the building. We advise checking the unexpired term of the lease at the earliest opportunity as lenders tend to match their repayment term to the remaining years on the current lease and if a new lease or an extension cannot be negotiated then this will restrict borrowing. 

Should I start preparing a business plan to present to the Bank?

We can help with preparing a proposal document that will cover all the key areas that a lender is looking for in a Business Plan. This document will include a Professional Profile and a Personal Profile covering all the things the lender will want to know about your experience but also your personal circumstances including asset & liability statement and household income & expenditure. We will incorporate a full profile of the business being purchased, your short and medium term strategy for the unit and a detailed first year forecast demonstrating that the requested level of debt meets the Bank’s serviceability tests

Can I borrow on a loan with a fixed rate of interest?

Most of our panel lenders offer both Fixed Rate and Floating Rate loans, the latter linked to Bank of England Base Rate.  Fixed Rate fixture periods are usually quoted for 3,5 and 10 year periods and upon expiry the borrower can either select the prevailing fixed rate or move onto a variable rate.

I am a practice operator with business loans outstanding with my current Bank. Will you include them in the competitive tender process?

We can include your existing Bank at your option provided that there is an existing Broker Agreement with that lender. Lily Head Finance have Broker Agreements with the majority of mainstream lenders in this sector. Discuss your requirements with us and we can agree an appropriate strategy.

What interest margin can I expect to pay?

Pricing is very competitive in this sector but there are still significant differences between the main players and much can depend on the loan to cost ratio, your personal background assets, available security and the length of the Bank’s commitment (please see our article on Banking Covenants). As a national broker we can offer the most competitive terms from our lending panel.

Is 100% finance possible?

It is possible to get 100% finance on the lower of the purchase price or Bank panel valuation of the Freehold subject to the Banks servicing tests being met. Credit appetite for the goodwill element does vary quite considerably between lenders ranging from 75% to 95% depending on the practice, the security offered and the servicing case.  The maximum amount of debt is driven by the ability of the business to service the repayments. Each practice is different and we therefore recommend we undertake a detailed Practice Review before you make a bid on a practice.

Which Bank offers the best deals at the present time?

Banks do change their lending parameters from time to time in response to market changes and it is our job to keep abreast of those changes and direct your tender to those lenders on our panel who we believe will have the appetite for the specific transaction and can offer the most favourable terms. 

Will I have to meet the Bank before I get an indicative offer of support?

All lenders are subject to FCA regulations in terms of adequate client identification and at some point in the process either shortly before or after the Underwriting Stage a meeting with the Bank will usually be scheduled.  However, we can obtain indicative terms from all our lending panel without you having met them and if you require our support at the introductory meeting then this can be arranged.  We do seek proof of address and identity as part of our own regulatory checks but credit checks are undertaken only by the Bank chosen to proceed to Underwritten terms.  

What is the difference between Indicative Terms and an Underwritten Offer.?

Our panel lenders will respond to a competitive tender with headline or indicative terms – this response will cover loan amounts, repayment term, interest margins, fees and security requirements.  Having discussed the detail of those terms we normally select one lender to undertake a full credit assessment and return with an Underwritten Offer – until the proposal has been approved by the Banks underwriters/credit team the offer remains indicative but our knowledge of each Bank, their credit appetite and relationship with our key contacts means that it is rare for there to be a significant change in terms at this second stage. All underwritten offers are usually subject to an acceptable independent valuation of the practice including the freehold where appropriate

What information will you require from me to approach lenders?

We usually seek some basic general information to include the date of birth and private residential address of all borrowers supplemented by an Asset & Liability Statement and Income & Expenditure Statement, CV/professional BIO plus financial accounts for any existing dental unit or remuneration accounts or tax returns for self employed associates. The lender will also usually seek 3-6 months of personal and business bank account statements but we do not ask for these until a lender is selected to obtain underwritten terms.

What role does Lily Head Finance perform once the lending is sanctioned by the Bank?

Facilities will be agreed by the Bank with a list of pre-drawdown conditions, one of which is usually a professional valuation but there will be other documentation that needs to be produced including proof of deposit, confirmation that all taxes are paid up to date, delivery of the Bank’s security requirements including sometimes, life cover. The legal and CQC processes will of necessity take your full attention and Lily Head Finance are on hand to liaise with the Bank and your other professional advisers to ensure that all of the Bank’s requirements are met ahead of the drawdown of funds.  We will also provide an overview and interpretation of the professional valuation and address any questions that the lender may have in the run-up to completion. It is sometimes in this period that our experience of Bank risk analysis and process can be of immense value to the client. 

Does Lily Head Finance charge a fee to tender a finance proposal?

The bulk of our fees are contingent on securing credit-backed terms from a lender for the transaction and payable by the client on drawdown. These fees will cover preparation and tender of a funding proposal including financial model/forecast for Year1, review and recommendation of indicative offers, selection and mandating of a lender to deliver underwritten terms, liaison with the lender during all stages of the process including valuation and satisfaction of conditions precedent up to and including the deal completion. Our fees are competitive based on the expertise of the individual Practice Finance Consultant who will manage your case and that fee is always agreed with the client and fixed at the outset.   

Is Lily Head Finance a Direct Lender or a Credit Broker?

Lily Head Finance is a Credit Broker, not a Direct Lender. We are authorised and regulated by the FCA and a member of the National Association of Commercial Credit Brokers

Do Banks pay Lily Head Finance for business introductions?

Lily Head Finance hold documented Broker Agreements will all the major lenders and these lenders will pay commissions direct to Lily Head Finance for business introductions. Commissions payable are disclosed on request but as separate documented agreements with financial institutions are not divisible with the client.