Dental practice finance

Who dental practice finance is for

The single biggest step for most dentists is moving from associate to principal. That first practice purchase is usually funded as a business acquisition, where the bulk of the value sits in goodwill rather than bricks and mortar, with the premises bought, leased or held separately alongside it. We act for associates making that leap, and for established principals buying a second or third site, bringing in a partner, or refinancing to release capital.

We also help dentists who already own their practice and want to fund equipment, a surgery refurbishment or working capital for a squat, a brand new practice built from scratch and started from the ground up. Whether the deal is mostly goodwill, mostly property, or a mix of both, we will tell you which lenders are most comfortable with the structure and what they will want to see.

We do not arrange insurance, but it is worth flagging early that lenders almost always expect appropriate cover to be in place before they release funds, from buildings insurance on a freehold premises to professional indemnity insurance for the dentist and, on a partnership purchase, life or key-person insurance so the borrowing is protected. We will tell you what a lender is likely to require so you can put it in place in good time and keep the deal moving.

Goodwill, premises and practice valuation

Dental practice valuation usually starts from the practice's profitability, often expressed as a multiple of adjusted net profit or EBITDA, with the resulting figure being predominantly goodwill. That goodwill is the value of the patient base, the contracts and the trading reputation, and it is what most acquisition lending is advanced against. Specialist healthcare lenders are used to lending a high share of a goodwill-led purchase price for a sound practice, because they understand how stable dental income tends to be.

The premises is a separate question. A practice may trade from a freehold the principal owns, a leasehold, or premises held in a connected property company. Where there is a freehold, a commercial mortgage on the building can sit alongside the goodwill borrowing, and lenders will weigh the lease terms or the property value accordingly. We will help you see the goodwill and the premises as two parts of the same deal, and arrange funding that covers both where needed.

NHS UDA contracts and private income

The income mix matters to a lender. An NHS dental practice earns against a contract measured in units of dental activity, or UDAs, which provides a contracted, recurring baseline of income. A private or mixed practice earns from fee-per-item and plan income, which can carry more upside but is read as slightly less certain. Most practices sit somewhere on the spectrum between fully NHS and fully private.

Lenders look at the durability and concentration of that income, the UDA value and delivery history where there is an NHS contract, and the resilience of private fee income where there is not. A practice with a stable contract and a settled patient base is a stronger lending proposition. We package the income story clearly so the lender understands what sits behind the goodwill they are being asked to fund.

Types of dental practice finance and how they fit

There are several types of dental practice finance, and a typical deal blends more than one. The most common is a practice purchase, funding the goodwill and, where relevant, the freehold premises for an associate becoming a principal or a principal adding a site. We also arrange refinancing, to release equity, restructure existing borrowing or fund a partner buy-in or buy-out. Beyond acquisition, we help with surgery refurbishment, equipment and asset finance for new chairs and imaging, and working capital to keep cash in the dental business while a growing practice or a squat build finds its feet.

Each type of funding behaves differently. Goodwill and commercial mortgage borrowing for a practice purchase runs over a long term as a secured business loan, asset finance is matched to the working life of the equipment, and business loans for working capital are usually shorter and help smooth cash flow. Spreading the cost through asset finance rather than buying equipment outright can save the practice from a large up-front payment and keep cash in the business. The right blend depends on what you are buying, your deposit, your personal credit profile and your plans, and we will help you choose the structure rather than pushing a single product. A dentist buying their first practice often combines a goodwill loan, a premises mortgage and a small working-capital line in one funding package.

Many cases combine more than one of these. A purchase may include a refit, or a refinance may free the cash that funds an expansion. We structure the funding around the practice rather than a single product.

Eligibility and the application process

Lenders assess the practice, the income behind it and you. They will want to understand the practice accounts, the income mix between NHS and private, the goodwill valuation and the premises position. From you they will look at clinical experience, your track record, your contribution from personal funds or deposit, and your personal credit profile, since a clean credit history makes the application process smoother. A clear business plan, recent business accounts and your own bank statements are the documents a bank or specialist lender will ask to see first.

The application process itself runs in stages. We prepare the business case, choose the lenders whose criteria fit, submit the application with the supporting documents, and manage the underwriting through to a successful approval and completion. For a first-time buyer moving from associate to principal, lenders place real weight on your clinical experience and the quality of the practice you are buying, which can offset a limited history of running a business. Getting the application right from the start, with the right documents and a realistic deposit, is what gives a deal the best chance of a successful, clean approval.

We are a broker arranging commercial finance, not a provider of regulated financial services or financial advice. Where the decision touches your wider financial planning, we will tell you to take independent professional advice before you commit.

Indicative terms

Terms vary by lender, by the practice and by the balance of goodwill and property in the deal, so these are indicative ranges rather than an offer. Goodwill-led acquisition lending for a sound practice is often available at a high share of the purchase price over a term commonly in the ten to fifteen year range, while a commercial mortgage on a freehold surgery can run longer. Asset finance for equipment is usually arranged over the useful life of the assets. Rates are priced to the case and the structure.

We will give you a realistic, indicative view once we understand the practice, the income mix and the premises. All terms are indicative and subject to status, valuation and full lender approval. Commercial finance of this kind is not regulated by the Financial Conduct Authority, and nothing here is financial advice.

How we arrange it

We start with a conversation. Talk to us about the practice you are buying or refinancing, the income mix and what you want the funding to achieve, and we will tell you which lenders are worth approaching. We then come back with indicative terms, and once you choose a route we package the application, work with your accountant and solicitor, manage the valuation and the lender, and keep the deal moving to formal offer and completion. You deal with us throughout, so there is one team to talk to from first enquiry to drawdown.