Purchasing a dental practice is perhaps a much more tricky proposition than it could have been three or four years ago.
The international credit crunch has certainly curtailed some of the deals that were available – however, with an element of planning and foresight, you can still ensure your proposal is structured to ensure maximum chance of success.
When raising finance to purchase a dental practice, my top 10 tips are:
1. Although it may be more difficult than before to gain finance, there are still lenders who will offer up to 100% finance on the freehold and goodwill. And remember, the cost of borrowing is currently at an historic low.
2. For a new start up, a sound business plan with realistic figures is a must. This should include:
• Your CV, including confirmation of your current income levels
• Brief ‘executive’ summary of your proposal
• Focus on new premises and layout
• Market and ‘competitor’ information (i.e. why you feel there is a niche for a new practice)
• Proposed working arrangements and opening hours
• Financial forecasts (P&L/cash flow) and assumptions behind the figures
• Staffing arrangements.
3. Specialist independent advice will be worth its weight in gold. Yes it costs, but doesn’t
everything that is worthwhile?
4. Are you buying on your own or jointly? There are advantages to a partnership, but the
practice in question will need a patient base of significant size to support this.
5. An independent practice
valuation is vital. You need to ensure that the figure being quoted by the seller is not
inflated and is realistic. This report will also give any
potential lenders the majority of the background information that they require.
6. Specialist legal advice from experienced dental solicitors is particularly key when dealing with issues of contract transfer.
7. Choose the right lender. Several of the major banks have specialist dental lending teams. This means that the decision whether to agree to your loan will be taken by people with experience of the dental sector and how a dental practice
functions. Alternatively, there are a number of companies that offer independent advice and search lenders on your behalf – effectively doing the ‘leg work’ for you enabling you to concentrate on your dentistry. This can be seen as the ideal option as you will have had access to the full range of lending deals on offer.
8. Most lenders will insist upon life cover, income protection and practice/property insurance. Again, seek independent advice.
9. Don’t jump in! Make sure that you review all of the possible finance options and choose the right deal for you (which is not always the first deal offered by your current bank).
10. Enjoy it when it comes to fruition! Owning and running a practice isn’t for everyone,
but for many it does bring enormous rewards and fulfilment.