Dentists Who Invest Podcast

Is 100% Finance For Dental Practices Possible? with Kevin Saunders [CPD Available]

• Dr. James Martin • Season 3 • Episode 395

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Can you really buy a dental practice with no money upfront?
In this insightful episode, Kevin Saunders clears up the myths and misunderstandings surrounding full financing for dental practices.

We begin by confirming that yes, one hundred percent finance is possible, but the path looks different for established owners compared to first time buyers. For those who already own a practice, Kevin explains how to unlock equity from your existing business while maintaining the typical eighty percent loan to value ratio that banks require across your portfolio. This approach can open doors to expansion opportunities that many dentists have never considered.

First time buyers face a different set of rules. Kevin outlines the lending thresholds currently available, which are around three hundred and fifty thousand pounds for private practices and five hundred thousand pounds for NHS practices when buying solo, with higher limits for partnerships. He explains how banks evaluate risk, what makes an applicant appealing, and why preparing your financial profile well in advance can significantly improve your borrowing power.

We also address common myths about interest rates, explain the differences between buying an established practice and starting a squat, and share practical guidance on when full financing is a smart move. Kevin’s core advice is simple: take the maximum amount available, because you are using the bank’s money to invest in a valuable asset.

This episode is essential listening for any dentist planning to buy or grow their practice, offering clear guidance to help you make confident and informed financial decisions.

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Disclaimer: All content on this channel is for education purposes only and does not constitute an investment recommendation or individual financial advice. For that, you should speak to a regulated, independent professional. The value of investments and the income from them can go down as well as up, so you may get back less than you invest. The views expressed on this channel may no longer be current. The information provided is not a personal recommendation for any particular investment. Tax treatment depends on individual circumstances and all tax rules may change in the future. If you are unsure about the suitability of an investment, you should speak to a regulated, independent professional. Investment figures quoted refer to simulated past performance and that past performance is not a reliable indicator of future results/performance.

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Dr James:

100% finance to purchase dental practices. Yes, it's a thing, but it doesn't always mean that it's a good idea. We have Mr Kevin Saunders joining us today to discuss 100% finance, how it's possible, when it works, when it doesn't work, and the intricacies that we need to know in order to make a decision whether or not it's right for us. I'm also happy to share that there is free, verifiable CPD associated associated with this podcast episode. Whenever you finish the episode, all you have to do is click the link in the podcast description. It'll take you right through the dentist invest website. You'll be able to complete a short questionnaire and, once passed, you fill in your reflections and we'll go ahead and email over to you your verifiable CPD certificate, which is entirely free. What that means is this podcast episode will be able to contribute towards your verifiable CPD hours during this learning cycle. Are the rumors true, Kevin? Does 100% finance exist?

Kevin:

The thorny subject of 100% finance. Yes, it definitely does, but we need to split this up. Firstly, anyone looking for a commercial property that the dental practice is based in can obtain 100% finance. Providing the practice can service the debt, then 100% finance has been there for some time for property. Then we really need to split this into existing practice owners and first-time buyers. So existing practice owners can fund a new purchase at 100, and the way in which we do that is that once you've got more than one practice, the banks like to be at 80 loan to value. So you can borrow 80 on the target practice and you can raise the extra 20% against the good rule values of your existing practices, as long as we can keep the overall loan to value 80% across all the practices. So many existing operators aren't aware of that and it's a great way. It's so much easier to get the finance after buying your first practice.

Dr James:

Yeah, gotcha Okay cool after buying your first practice yeah, got you Okay cool. So the total amount that you've borrowed can't exceed 80% of the valuation of all the practices. Everything together, right.

Kevin:

Yeah, that's for existing operators.

Dr James:

yeah, For existing operators, which gives you quite a little bit of leeway. If you've been paying something down a lot over the years, there might be a lot of equity there.

Kevin:

And you know yourself, goodwill values tend to go up. We've had a couple of blips over the last 20 years where they'll drop for a year but then they pull through again. So, yeah, you hold on to a practice for five or six years. You're paying the loan down as well. It's quite feasible that you can raise the 20% for the new practice on your existing practices. The banks like to be at 80% on existing operators because they feel that there should be some fat in the game from the dentist themselves and also because the more practice you buy, there is a bit of a risk element there as well, because you're not just doing clinical work then you're trying to manage across multiple sites. So so hence, the loans have only been right.

Dr James:

So, to paraphrase, it's not so much the case that this is accessible for first-time buyers.

Kevin:

So first-time buyers is more tricky, but, yes, in some circumstances it is possible. So I guess we have to go back first of all and talk about lending guidelines for banks. There are guidelines and banks have certain guidelines in place, but it's not to say that just because they have a guideline that says they can potentially lend 100%, that they're going to every time Getting a sanction to put their name to a case. When it's 100%, they're going to be more nervous. So they need all the reduction in a line, basically. So you need somebody who's performing well. There's an associate dentist who's got background assets and it's probably easier to look at it the other way. What looks bad to a bank sanctioner? It's someone who's renting, hasn't managed to save any money up, has got some finance agreements here and there, someone that could just disappear, basically. So, um, I mean, we do a lot of work with associate dentists before they're ready to buy to say, but here's what you need to do to get ready. Uh, and it's always best to talk to people a couple of years before they want to buy a practice. But okay, so if someone wants to buy their first practice, as we've said, property side's, fine, uh 100 available on that when it comes to the goodwill, it's a bit more tricky.

Kevin:

There's no exact figure to this, but if you've got two dentists buying together, then we can raise more money. I'm going to give you a rough figure. If it's private, that could go up to about 700,000 presently and NHS up to about a million with two dentists buying. If it's one one, it's half of that. So one dentist could probably raise about 350 private and 500 nhs um on 100 finance. So you can see it work for some some cases. If someone's looking at a practice that's worth 350 000 and there's a 500 000 pound freehold, yeah they could get all of that on 100 finance um. If the um, if the goodwill value is a lot higher, it starts to get tricky. That said, um watch this space because we work very closely with the banks and on their credit policies and reviewing them and we may just be just about to get a shift in that, so those values might go up and it might be possible to be bought, to buy, to borrow uh more on 100 finance and nhs and private may be about to come into line, so, um.

Kevin:

So yes, it is there, but everything's got to check out the practice. Financials have got to show serviceability, and that's the thing everyone forgets. The more money you borrow, the more profit you've got to have in the practice. Financials have got to show serviceability, and that's the thing everyone forgets. The more money you borrow, the more profit you've got to have in the practice. And I need to show the banks that the business can afford the loan at exaggerated interest rates and also there's enough money there for the applicant or applicants to draw a salary, so, um. So the calculation gets a bit tougher when you're going up to 100%, so that's got to be right. The person's background assets have got to be right. The practice has got to be good. So yeah, it is possible, but everything's got to fall into line. Basically.

Dr James:

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Kevin:

even on the property on a startup practice. The bank probably wants to be at 70 or 80 percent on that because it's obviously more risky. There's no income there to service the loan day one. So uh, yeah, these are for established practices. We're talking about 100 now I see.

Dr James:

So just to just to clarify, just to add one more thing on there if you're in established practice and then you want to get up a squat, can you get 100, or is that also a no-no?

Kevin:

That's a really good question. So then, yes, potentially you can, because you can borrow 70% on the startup practice and you could, in theory, raise the extra money from your established practice. I mean what tends to happen, because when you set a squat up, it tends to be a lot lower the level of finance and if someone's had a practice for a certain number of years, they've probably got enough equity there to do 100% of the squat setup costs. So, providing they're keeping that 80% loans of value bracket on their established practice, then yeah, I've done a few cases recently like that for clients as well.

Dr James:

Awesome, and listen, listen, without giving financial advice, of course, because that's not what we're here to do or anything along those lines. 100 finance when do you feel it makes sense for somebody, versus when does it really not make sense? Like, yeah, the bank might give it to us, but does that mean that well, it's, it's, it's good for us or, uh, it's going to be helpful? What are your thoughts? Thoughts on that.

Kevin:

So I was about to say the time not to take the money is if it's tipping the scales and you haven't got enough free income to or you're really up against it. But saying that that just wouldn't happen because I mean, firstly, I would assess that to make sure that's not the case and secondly, the bank will do it as well. I mentioned earlier the bank. If the annual servicing costs of the loan are 50 000, they're going to be looking at 65 000 of free income to cover that, to make sure, if the rates go up higher, that the loan's covered. So actually the best advice when it comes to commercial finance is, you know, unless you're about to sink yourself, is always take the maximum amount you can because you're using someone else's money to invest in a business that way excellent.

Dr James:

And one more thing we've got to touch on this as well, because obviously this is relevant. If I take nine percent finance versus 100 versus 80, presumably the interest rate is higher on 100 finance sometimes, not always, it just depends on the case. I always like to ask that question because I always presumed it, and it's not always the case I know it's the simple answer would be yes, but but it's not really.

Kevin:

Because if somebody has just bought a big freehold with the practice and obtained 100% on the freehold and on the um goodwill, well, the bank might be happy with the freehold and think, well, that will help us bring the rate down on the goodwill loan as well. Um, I think it probably would be a little bit higher on 100. But it's more about the bank that's prepared to lend you the money and what their rate is, because not all banks will do 100. I've probably got one or two banks that'll do 100 on goodwill, if for a first-time buyer, sorry for an associate. So it's more about what their rates are After that.

Kevin:

I mean, if you're borrowing 90% or 80%, it's probably broadly similar. So I always say to clients look, we'll definitely get you 80%, we'll try for 90% or 100%, anything we can get. You know we will get the highest loan-to-value possible, but the rate doesn't always change so much. So, in summary, um, for established operators, you can contact us and we'll tell you what we believe you're better raised on your existing practices and that will help give you a steer on on a practice you can look for if you're looking to to basically raise 100 finance um for associate dentists. As ever, I would say talk to us sooner rather than later. We can steer you in the right direction. So you look like a good prospect for the banks to get the highest loan to value possible.

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Dr. James Martin

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