Buying a dental practice is easier said than done. However, this remains a firm aspiration for many associates who clearly see a value in owning their own business because of the long-term investment opportunities.
A determined approach, with guidance from expert professional advisers, is essential to a successful purchase. Finding the right practice in the right location can be difficult, but associates should never overlook the challenge of arranging finance and the associated costs of the purchase. There are some fundamental issues to deal with along the way.
Consider your ‘strategic buying position’
At the very least, a basic self-assessment of your experience and financial position is helpful. However, it is equally important to consider the type of practice you would want to buy and how this might fit in with your career plans. Banks will want some reassurance that you are able to manage your new role. For example, concerns might be raised if your UDA output is much lower than that of an outgoing principle. It is quite common to want to buy a practice jointly. This certainly has some advantages, but it will require the right practice with a sufficiently large NHS funding or private patient list.
Specialist skills and a strong CV are often an advantage and may be expected by a bank if you intend to develop the practice in a specialist direction. This can work to your advantage, as can outlining to the bank opportunities such as developing a private practice, or using surgery space on days where it is unoccupied.
Get a professional valuation
Ensure you are paying a realistic price for the practice and that there is sufficient
profitability to make the purchase viable. A professional valuer should visit the practice and make a detailed assessment of the goodwill, fixtures, fittings and equipment. Your valuer should examine the practice accounts and schedules and alert you to any potential problems or opportunities. The valuation report will add weight to your finance application and provides the bank with much of the required background information to assess a finance application.
Raising finance: don’t fall at the first hurdle and choose the right bank
There are a small number of banks who offer a specialist lending facility to dentists. You are well advised to use these banks. They tend to offer the most competitive interest rates and their credit team (the decision makers) will understand how a dental business operates. A dedicated bank manager, experienced in dental lending, will be assigned to you from the outset. Banks without a dental lending division will probably want your business. Beware of this – your application might be rejected later down the line by a decision maker who applies non-dental profit expectations or a non-dental valuation to the practice you are buying.
Seek independent specialist advice on raising finance
A specialist independent adviser can prepare a detailed ‘lending report’ in support of an application. This will cover your financial profile and that of the practice with commentary on why you are a suitable purchaser.
This offers reassurance to the bank that you meet their lending requirements without undue risk. The banks will expect you to cover the loan repayment in the event of death or ill-health. They will insist on an ‘assigned’ life cover policy, ‘adequate’ income protection, surgery insurance and practice expenses (locum) insurance. You should seek advice from an independent adviser to make sure you have dental-specific cover.
A strong application which is supported by a ‘lending report’ should allow you to borrow the funding you require or at least reduce the requirement for a deposit or alternative security.
Consider the costs involved
Specialist legal advice from an experienced dental solicitor is essential to make sure that issues such as the contract transfer are dealt with properly.
You could expect legal costs and bank fees (including valuation costs) to be between £5,000 and £10,000. Some initial costs can often be added to your loan and repaid at a later date. There will be additional monthly costs to consider such as insurances and the loan repayment itself. You should expect your accountant to charge a higher fee for practice accounts than associate accounts. Practice owners will rightly tell you that running a business while fulfilling a clinical role is a challenge in itself. However, for many this is a rewarding career path which offers control over your future and the opportunity to build up a saleable asset.
