There is a lot to consider when buying a dental practice, so having a clear understanding of the financial landscape and the opportunities currently available is more important than ever.
Over recent months, we have seen a noticeable shift in the dental lending market, creating new opportunities for buyers at all stages of their ownership journey.
Overview of the current lending market
Over the last several months, a major lender made a significant change to its lending policy, driven by a long-term ambition to increase its share of the healthcare market. This included enhanced Loan to Value (LTV) ratios, typically around 90% LTV for goodwill and up to 100% LTV for freehold, alongside more competitive interest rates.
This had a substantial knock-on effect across the market, with other lenders responding in order to remain competitive. Lenders who had not previously offered similar funding levels have begun to follow suit, further emphasising how competitive the current lending landscape has become.
In response to this increased competition, a previous market-leading lender has also enhanced its policy, now allowing up to 100% LTV funding on goodwill for strong First Time Buyer cases.
The result has effectively been a race to the bottom on interest rate margins, creating a far more competitive environment for buyers seeking lending within the dental sector. In several recent cases, market-leading lenders have offered interest rate margins below 2% for full-term commitments.
Impact on buyers
We have seen a clear increase in buyer activity over recent months, with more purchasers entering the market and competing for available practices.
Multiple reductions in the base rate, combined with improved LTV availability and more competitive pricing from Tier 1 lenders, are helping to drive this renewed confidence. Associate dentists, First Time Buyers and existing principals now have stronger funding support when considering acquisitions.
Lower interest rate margins and improved lending terms represent a significant positive for buyers, particularly when considering long-term borrowing costs.
We are also seeing an increase in refinancing activity, as existing practice owners review historic lending arrangements and move to more competitive lenders, whether to improve pricing or overall terms. Buyers now have greater choice again!
Making lending more accessible
Following these wider market changes, another lender has introduced a policy allowing loans of up to £750,000 per individual dentist without requiring a bank valuation.
Given that valuation costs can exceed £3,000 in some cases, this represents a meaningful saving on upfront costs and can help accelerate the transaction process.
However, it remains important that buyers fully understand the overall cost of lending across the full loan term, ensuring funding decisions are considered within the wider commercial picture.
Freeing up cashflow for growth
Additionally, the same lender is now offering the possibility of capital repayment holidays of up to five years in certain cases. While the full five-year period is not guaranteed and will always be assessed on a case-by-case basis, this can be particularly beneficial for buyers or existing owners looking to expand their portfolios.
Servicing interest while deferring capital repayments can allow buyers to retain cash within the business, supporting future acquisitions or reinvestment opportunities while maintaining manageable cashflow.
As always, the merits and risk profile of each case will determine the suitability and duration of any repayment holiday.
Advice and support along the way
The above provides an overview of the current financial climate within dentistry and highlights some of the opportunities now available to buyers. However, funding structures can be complex, and securing the most suitable terms often requires specialist guidance.
DE Finance works closely with all Tier 1 healthcare lenders, alongside a number of challenger banks, placing the team in a strong position to support buyers throughout the financing process.
Following a recent successful funding case I am proud to have received the following client feedback regarding the support we provide to our clients:
“I wanted to take a moment to personally thank you for the exceptional support you provided throughout our journey to acquire the practice… Your availability, problem-solving mindset and genuine commitment made all the difference.”
Final Thoughts
Whether you are a first-time buyer, an existing practice owner or part of a growing group, understanding the current lending market and the opportunities available is key to maximising long-term growth.
For more information on Dental Elite visit www.dentalelite.co.uk, email finance@dentalelite.co.uk or call 01788 545 900
Author: Luke Shelton Senior Financial Consultant Dental Elite
