Changes to NHS funding mean many practices are having to look elsewhere for financing in order to grow and improve their businesses.
Whether the funds are needed to renovate a surgery to comply with the latest hygiene regulations, to upgrade equipment and facilities to attract new patients, or to make an equity investment in a surgery, the costs involved can be so high that it is likely a commercial loan will be needed.
Here are some of the key things dental practices should think about when they approach banks for financial assistance.
Look for a specialist lender
Despite the upturn in the economy, some high street banks are still reluctant to lend to small businesses, so it is worth seeking a specialist lender that has an in-depth knowledge of the dental profession and understands the increasing pressures on a practice’s finances.
Because they have expertise of working with dental practices, these lenders are able to make quick and well-informed decisions when it comes to approving loan applications.
Depending on why funding is required, it is possible to access secured and unsecured commercial loans from a specialist bank, such as Wesleyan Bank, from £2,500 and up to as much as £2 million. These can be repaid over periods from three months to 20 years, with a variety of options including fixed and variable interest rates.
Prove you are a good borrower
Whoever you borrow from, your chances of getting a loan approved will improve if you can prove you and the practice are financially viable.
Banks will primarily need to be satisfied that a practice is able to maintain the monthly repayments on any loan they take out. Dentists with a proven income stream made up of NHS contracts or private patients should be looked upon favourably, and banks may consider higher loan amounts for them compared to other businesses.
Lenders may also want to know that your personal financial situation is stable. For example, they will look at your savings and investments, and any other outstanding loans you may have, including mortgages. Some banks may also want to know more about your career experience. The more you can prove your expertise in dentistry and financial viability, the more flexibility you may be given with your loan.
Put a business plan in place
If you are a dentist looking to expand, it is wise to put a robust business plan in place to show how you will make the practice an ongoing success. It should look back at the recent accounts for the business, as well as forecasts and proposals for the years ahead.
By doing this it will force you to consider issues you might not have previously thought of, such as cash flow and earning needs at various times of the year, and the kinds of customers, and numbers, you will need to attract.
Developing a plan like this will not only mean you and the management team of the practice properly understand where the business is headed, but also clearly show lenders you have carefully considered what you need the money for and that the practice is financially viable.
With NHS budgets likely to get tighter, obtaining funding from other sources will become increasingly important to dental practices as they attempt to stay ahead in an increasingly competitive marketplace.
Being clear about what you are borrowing for and how much you need, backed up by a robust business plan, will go a long way to helping you receive the finance you need and ensure your practice can continue to grow and attract new patients.
Talk to a specialist lender that not only recognises the pressures dental practices are under, but can also work with you to ensure the conditions of the commercial loan are specific and appropriate to your needs.
Wesleyan Bank is part of Wesleyan Group, the Birmingham-based mutual that provides specialist financial advice and solutions to dentists. For more information on Wesleyan, visit www.wesleyan.co.uk.
The above information does not constitute financial advice.