The dental market is thriving and now is a good time to jump on the proverbial bandwagon.
There are many factors for this boom in activity. Mostly, the market is more stable now than it has been for a number of years. The banks are also keen to lend in the dental arena as it is dubbed a ‘green light sector’ – buyers are cautious and savvy in their approach to buying practices, therefore making them good investments for the banks. That said, gone are the days when banks would lend unlimited and unsecured amounts to an individual just because they have a dental qualification. It is the ambition and aggressiveness to succeed of today’s young dentists that gives banks confidence to lend.
With banks also currently offering exceptional interest rates – possibly the best in years – there are now many opportunities for buyers to acquire their desired practice, and for sellers to achieve the best possible price on their business.
Of course this is partly attributable to the UK’s low base rate, which has remained at 0.5% since 2009. Because of this the typical loan rate can range anywhere between 1.98% and 4%, depending on the bank lending and the personal financial situation of the purchaser. This means that buyers from large corporates or first time buyers can achieve low interest rates coupled with great terms. At this time, even the highest interest rates are great, and while the banks continue to lend and the base rate remains unchanged, any deal is a good deal.
Now is also a good time to borrow because the banks have much more confidence to lend in comparison to several years ago when the economy took a plummet. As a result of the upturn, the Enterprise Finance Guarantee (EFG) loans are now a last resort as opposed to first port of call for lenders. If you have a loan against the EFG, it would be prudent to seek guidance and support from a dental finance specialist – just because the bank needed that security then, doesn’t mean they do now, so you could be paying more than you need to.
For those presently looking to secure a loan, there are still multiple factors that need to be taken in to consideration. Buyers in particular should be asking themselves a series of questions before they even approach the bank. For instance, do you have the relevant knowledge of the financial process? Do you understand the acquisition? Is the practice you’re looking to buy financially viable? Have you completed the relevant and necessary research? Questions like these can hamper your ability to successfully secure finance for your acquisition, if you don’t know the answer, leave no stone unturned. Make sure you find the answers so that the bank manager can get comfortable with your request for lending, it’s not just about the money!
The banks are confidently lending at decent rates, but in order to secure the right deal with the right bank, advice is key. If you approach the bank yourself, how do you know you are achieving the maximum loan possible at the best rate? The reality is, if you look in the wrong place you could jeopardise your chances of securing funding and getting the best lending rate. Not many bank managers will highlight the fact you are paying a high interest rate, but by asking the right people for the right support, you could save yourself thousands of pounds in repayments.
It is also important to remember that the work doesn’t stop once the loan is secured. In fact, buyers should consider revisiting their loans every three years to ensure that the deal is the best it can possibly be – if it’s the difference between paying 1.98% OBR compared to 3.5% plus the EFG premium, it’s time well invested.
All in all, the financial commitment that buying a practice entails can be a daunting experience, especially to first time buyers, which is why seeking guidance from a dental finance specialist is paramount to the outcome of the process.
With its excellent rapport with the banks and unrivalled knowledge of the market, DE Finance can assess a buyer’s upper lending limit, secure a tailored loan and where needed, refinance an existing portfolio.
If you want a bank to take you seriously you’ll need to knowledge the potential of a practice while understanding the risks. To get the best deal available, be confident, seek the right support systems and take the right approach. Utilising relevant seminars, communicating with specialists and sharing experiences of other purchasers will all help – there is a fountain of knowledge around you to help ensure you secure the right deal.
Originally Published in the Dentist in July 2016