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What does the interest rate rise mean for your business? Mitchell Lea Sales Manager for Wagemate

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  Posted by: The Probe      16th November 2018

You will have seen by now that the Bank of England has increased the base interest rate from 0.5 per cent to 0.75 per cent. Only the second raise in the past decade, the new base rate is currently at its highest since 2009.

But what does this mean for your dental practice?

Essentially, there are three key outcomes of the rise: lower spending and less borrowing but greater savings.

Reduced spending

Most consumers are in debt, due to either a mortgage or credit cards. The rise in interest rates will mean that they have to pay out more every month, so will have less disposable income and therefore will probably spend less on the high street.

Dental practices could see the impact of this, especially on cosmetic treatments as these might become a lower priority for those patients who need to be more careful with their spending. With regards to routine dental appointments, patients should be reminded of the importance of regular check-ups to ensure that they appreciate the value of their investment. Detecting potential issues early will not only help to maintain their health, but could also enable them to avoid more costly interventions further down the line.

Tougher borrowing

For practices looking to grow, the higher interest rates will make it more difficult to find capital as loan repayments will be higher and therefore eligibility will be more restricted. As a result, growth may therefore slow down, so business strategies will need to reflect this new economic situation.

It is also worth noting that for any practices currently repaying loans, the increase in interest will affect annual expenses. In fact, research by Hadrian’s Wall Capital – a specialist debt collector – estimates that small and medium sized businesses (SMEs) could be out of pocket by up to £355 million in the first year alone.[i]Only around 16 per cent of SMEs are believed to be borrowing on a fixed rate basis, so the vast majority will be subjected to the increase in repayments. In practical terms, the actual cost to dental practices will depend on the size of their existing loans.

Better savings

On the bright side, anyone who is saving will be able to save more and the higher interest rates may even persuade others to start saving wherever they can. This is particularly good news for professionals looking to build their own personal savings.

It also seems unlikely that the interest rate will increase to 5 per cent or above, as the Bank of England’s inflation report puts natural inflation at between 2 and 3 per cent.[ii]This is due to the ageing population in the UK – older people generally save more and so this will provide a greater pool of savings for lending to businesses in the future. In addition, with pension pots growing for future generations following roll out of the auto-enrolment scheme, the potential savings available for lending should make raising capital easier for dental practices in the future.

Adapt to thrive

The Bank of England has reported that the rate of small businesses closing down is increasing – but this is not due to lack of consumer spending. Instead, it seems that consumers are more likely to shop online than to physically visit stores on the high street. To ensure your practice is maximising on the opportunities available and future-proofing its income, consider investing in your own online presence and making your services more accessible in this way. Most patients will look online when searching for a new practice or to find out more about a practice that is local to them. Highlighting any added value you can provide, as well as positive feedback received from previous patients will help to distinguish your business from others and encourage people to continue visiting you for their dental care.

In addition, it remains essential for dental practices to maintain strict control over their finances in order to avoid any potential issues. Managing payroll efficiently and ensuring the right funds clear for bills and BACS payments will facilitate the smooth daily running of your practice – the Wagemate automated payroll service could be of huge benefit in this area, saving you time, money and hassle with its risk-free guarantee.

With annual costs rising, adaptability is key in order to secure the future of your practice. Being visible in the right ways and streamlining daily processes could be the key to maintaining financial stability in the long-term.

For more information Wagemate,

call us on 03330 102102 or email info@wagemate.com

 

[i]Hadrian’s Wall Capital. Industry News. Small businesses could be hit by £355m in interest charges if rates increase by a quarter. March 2018. https://hadrianswallcapital.com/who-we-are/media/small-businesses-could-be-hit-by-355m-in-interest-charges-if-rates-increase-by-a-quarter/[Accessed August 2018]

[ii]Bank of England. Inflation Report. August 2018. https://www.bankofengland.co.uk/-/media/boe/files/inflation-report/2018/august/inflation-report-august-2018.pdf?la=en&hash=07356C865A7416716C85C54FD7F752BF9DF0E19B[Accessed August 2018]


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