Mastering Financial Health: Strategies for Dentists to Navigate High-Interest Loans and Refinancing

Struggling with the burden of high-interest loans in today's volatile economic climate? This episode promises to arm you with strategies to manage those financial pressures, especially if you're part of the dental industry. We'll dissect the recent surge in interest rates and what it means for your monthly payments and cash flow. Learn how to navigate this shift from a seller’s to a buyer’s market, ensuring your practice is presented in the best possible light for potential buyers.

Do you know how refinancing could transform your business's financial health? We shed light on the strategic advantages of refinancing business loans, from lowering monthly repayments to consolidating short-term, high-interest loans into a single manageable one. Discover how you can free up capital for investment or savings and even remove extra security like a second charge on your property, simplifying your financial management. Our real-world examples will illustrate how even small interest rate reductions can lead to substantial savings over time.

Maximize your practice's financial deals by comparing offers from multiple banks, and learn the benefits of joining a buying group to slash costs on essentials like consumables and utilities. We'll also explore how these cost controls can impact your practice's valuation if a sale is on the horizon. Plus, we address a listener's query about securing finance for a startup, stressing the importance of refinancing options and leveraging resources for stability. Don’t miss our wrap-up where we address your final questions and provide further guidance. Tune in for comprehensive insights and actionable advice to navigate the current financial landscape.

Transcript

Speaker 1: 0:20

Okay, good evening, good evening. Right Before I kick off, I want to make sure everything's working technology-wise. I think it is. Yes, I think it's working, which is a good sign. So, right, good evening everyone. Welcome to this webinar. As we've nicely put on this webinar at the bottom, my name's Aaron and I've got Dan here. Hey, dan, how are you doing? Very good, how's everyone? Hopefully good, hopefully good. Now, what we are going to be talking about this evening, we'll keep it relatively brief and short, but hopefully to the point. Um is refinancing um any existing loans. Now, without further ado. Do you want to just do a? Give a summary down what's happened in the last few years in terms of interest rates?

Speaker 2: 1:09

so pick for people to just to give a recap where's it going, maybe hopefully yeah, so, yeah, so over the last couple of years there's been a steady rise in terms of interest rates, going up, unfortunately, for for everyone you know, not just businesses, but you know homeowners as well. Um, obviously there's been another factors in including that include, like you know, inflation, etc. Um, yeah, that has put a pressure in terms of what people have been paying, because we have been used to a lower interest rate, or Bank of England interest rate being at 0.01 for a number of years, but now that's gone up to 5.25. Really is what you can do in terms of? You know you can't do anything about the, the base rate element, but you can do something about the rate that the bank charge you. Um, hopefully, base rate may be going down. Um, I don't think it will be soon. Maybe september is is what I'm, you know when I'm reading all the information on that.

Speaker 1: 2:15

That's what we're hoping, I guess that's what we're hoping for.

Speaker 2: 2:18

I think everyone's hoping for that to go down. But what I think you're going to find is that base rate. Once it does start dropping, it's only going to be, you know, slowly. It's not going to suddenly go down by a huge amount, so you're still going to have a higher rate than what people have been used to over the last couple of years. Possibly that the new norm may be around 4% 4.5% going forward Hopefully I'm wrong on that and it goes down again a little bit further. But yeah, so I think we're just trying to look at ways to maybe save a little bit of money on your repayments and free up a bit of cash flow in the business.

Speaker 1: 2:59

Correct. Okay, cool, right. So let me just thanks for that. Let's just kind of do a bit of a quick intro of ourselves. So for everyone out there, that's me looking a bit smarter. I'm like 50th birthday actually. I'm a bit older now. I'm Aaron and I'm the owner and CEO of Samara Samara Global. Bit older now, I'm Aaron and I'm the owner and CEO of Samara Samara Global.

Speaker 1: 3:23

Samara has been around 20 odd years now helping dentists across the UK with financing, accounting, tax, all that type of stuff. So we've got a lot of experience, a lot of grey hair experience advising all shapes and sizes of healthcare professionals. I'm also the owner of Semera Global, which is a team based overseas where we support other accountancy firms with all their offshoring and accountancy needs. I also have a foot and ownership of the Neantree Dental Group, which is owned and run by my wife, smita, a dentist. So we've got a wealth of experience of understanding dentistry.

Speaker 1: 3:57

And what we've seen is, I think it's over the last 10, and what we've seen is, I think over the last 10 years, we've seen a lot of acquisitions happen of practices. Over the last few years, um, when interest rates were lowest down, was mentioning. Now we're in a different climate. Um, so in those days you have so much competition to buy a practice, you know the practice comes to market and everyone's jumping on the bandwagon to try and buy it, so it was a seller's market. Now it's the other way around, in my view. It's a buyer's market. Okay, interest rates are higher, so people are more questionable and choosy about what they're going to buy, and sellers who don't conform or don't kind of present their practice in the best light, they're going to struggle to sell them. That's my opinion and my view, and we're seeing that across the board actually now. So that's kind of a quick intro about myself. How about you, dan? You look a lot better there as well.

Speaker 2: 4:51

Well, I think that is a well go. I'm having to keep the hair a bit shorter to stop the grey hairs coming through. Now that's all right. Yeah, so I'm dan fearing. So I've worked at samira now for five years. Um, I'm a finance broker in my former career. Um I worked for rbs for 20 years. In the last 10 years of that I was in the healthcare department. So you know, dealing with dentists, um, pharmacies, gps, veterinary practices, so very much health care based, making sure that you're arranging finance for them, relationship managing. So it was also. It was quite a nice fit when I when I left the bank to come to Samira, because obviously we do all those type of services.

Speaker 1: 5:34

Yeah, yeah, absolutely OK, cool, thank you. So let's crack on a bit more. So, do you want to take it away? Dan, yeah, so why consider?

Speaker 2: 5:41

refinancing, yeah, yeah, so why would you consider refinancing? So, like I was saying before, um, obviously interest rates have steadily increased over the the last couple of years, which has had an impact in terms of what people are paying for their loans. So you may not have sort of looked at this in the past. You know your rate was what your rate was and you sort of just carried on repaying your facility. But you do sort of have a control over you know the rate the bank charge you. We've got some slides later. It's all comparisons.

Speaker 2: 6:17

But you know if you're currently paying, you know, above 3%, there are lenders out there in the marketplace that can do maybe two and a half plus base. So that can have quite a big impact in terms of what you pay on a monthly basis. And the other thing as well that we've noticed is that there's quite a few lenders that have sort of moved away from the market as well and come out. So if you're currently with a lender that's no longer you know, arranging finance to the sector and not helping you grow Again, that could be another reason to look at. Is it time to maybe refinance with a bank that can help me grow and sort of move forward, because if they can't arrange finance for you, you sort of put in quite a difficult position, really sort of moving forward. So you know, there's a couple of sort of things to look at really when you, when you're looking at refinancing. So we've seen we've seen.

Speaker 1: 7:15

Actually, on that note that we've seen quite a. This is a few years ago. A couple of years ago, one of the big lenders, who was new to the market, was very kind of active and trying to secure loans or provide legacy loans which are probably not at competitive rates. Okay, so that's definitely an impetus to actually reconsider it and, as you said, if you're wanting to exit those types of loans and grow further, it's an important thing to look at it and look at your contracts. Get in touch with us and there are ways to get out of any kind of term. Just if the lender's not in the market anymore. Um, there may be ways to exit those types of arrangements because obviously the fca may be able to support you on that as well correct, yeah, yeah.

Speaker 2: 8:12

And also like, if you've done a startup, um, you know, a few years back, um, startup finance tends to be a little bit more expensive because you know the banks see it as a risk because they're taking a chance on a brand new business. We, we, very much like startups and we do a lot of startup practices because you know, we, we, we understand them and we can make sure we lend to them in the correct way. But the rates seem to be slightly higher. But the weird thing with bank policies is, once you've got a couple of years of accounts, you know you're in a fully established business. So what you could do, if you're honest, you know you started up a practice and you're on a higher rate again, that could be an opportunity to refinance that onto. You know a lower rate going forward, because just because you you've got a loan for 15 years doesn't mean you have to be on that same rate for 15 years. You could move that to another lender and reduce the rate that you're currently paying yeah, yeah, okay and so, okay.

Speaker 1: 9:09

So valid reasons to refinance anyone who's got loans okay, especially anyone who's not, whose bank isn't in the sector anymore. I think that's a really important point. Yeah, okay, let's move on. I think that's right. So key benefits.

Speaker 2: 9:27

Yeah, so a bit like we sort of touched on a little bit in terms of refinance, so cost savings, so saving money in terms of your monthly repayments. You know, by reducing the rate that you're being charged by the bank, you know your monthly repayments, you know, by reducing the rate that you're being charged by the bank, you know your monthly repayments will go down. By reducing your monthly repayments, obviously that'll have an impact on your cash flow. So you've got more money within the business that you can either use to, you know, invest or save if you want to do that as well. We've also found as well with the sector is that sometimes you may have your main loan but you could also have some other smaller loans which are on short repayments but, you know, on a higher interest rate. You know you can consolidate that debt into maybe one, one loan over a longer period of time. Again, that will help with your, your cash flow in terms of the business as well, because obviously you're paying, you know, maybe a 50k loan over five years, the repayments and that are going to be quite high, but if you turned it out, maybe over a longer period of time, that will reduce your monthly repayments. Um, even if you've got a loan already and you might have had it for 10 years or so, but you own the freehold and you want to turn that loan out over a longer period of time Again, refinancing that over a longer period would again reduce your monthly repayments so you could do that again to help with the repayments for your cash flow payments, for you know, your cash flow. And then security. We've we've come across this a lot recently. Um, in terms of some of the lenders that you sort of touched on earlier, where they came into the market and were quite new to it and they were doing things that not all the other lenders do and sometimes they were asking for sort of extra security as part of the transaction. Sometimes they were asking for sort of extra security as part of the transaction. A lot of lenders within the health care space and especially the dental market will do the lending unsecured.

Speaker 2: 11:26

If a lender has like a second legal charge over your residential property you know, does it need to be there Could you refinance and release that charge that the bank's currently holding? Because if they do hold a second legal charge on the property, if you wanted to move and change homes, you would have to get consent from that bank for them to agree for the move, and the charge would need to be moved across as part of that, which would have. One, you've got to get the bank's consent and also you're going to have extra security costs because that security would also need to be removed security costs because that security would also need to be removed. So another reason is, say one, you could, you know, reduce the rate that you're paying and two, you could get rid of that extra security that you know is tied into your business loan and not everyone's comfortable with that.

Speaker 2: 12:17

Not everyone wants all their eggs in one basket. You know you may, you know worst case scenario, if something did happen with the business. Um, you know you don't want your property residential property to be involved in that transaction as well. So you know a lot of people like to keep it separate. So it could again also be an opportunity to look at that and split the business and you know your personal sort of properties.

Speaker 1: 12:41

Sure, if I could add one other bit, I was working on another client that I know that has a lot of short-term debt. Okay, over COVID, that they had financial issues and ups and downs and therefore, rather than securing a loan with one of the bigger lenders or well-known lenders, they've taken on short-term debt which is very, very expensive, higher interest rates and suddenly, before you know, they've got hundreds of thousands or even more in short-term debt where they're having to pay, month by month, large, large amounts of money which is killing their cash flow. Um, so for anyone in that situation, there is a root out. If you've got lots of short-term debt in your business, um, it's about consolidating, understanding what the basically putting a full breakdown of what debts you do have with which lenders and then trying to, okay, work with someone like ourselves to say right, we understand, you've got debt of X with these different lenders. Let's try and consolidate it into one loan with another party over a longer period of time, which will then suddenly improve your cash flow.

Speaker 2: 13:45

So it makes it manageable as well. As well, really, because if you're paying loads and loads of short-term debt, you know at the time it probably served the purpose and it seems a good idea. But if there's a lot of loans on short-term debt, the repayments are so expensive it can sort of stop the business growing going forward.

Speaker 1: 14:02

Yeah, correct, so you, so you want that cash flow so it's so important to have that addressed early. So do you want to run through this example, Dan?

Speaker 2: 14:10

Yeah, so this is just a nice simple basic example really. So it's based on if you had a loan of £400,000 over 15 years at a rate of 4% plus base it was a base at the moment 5.25. The monthly repayments on that would be around 4,116 pounds. If you refinance that over the same term, you know same amount, but at two and a half now the repayments on that go down to 3,765 pounds. So I know it doesn't seem a lot, but that's a monthly saving of around £359.

Speaker 2: 14:47

But if you do that over the term of the loan, you know that that's about £63,000 so and although you've got that okay, it doesn't seem too much on a month-to-month basis, but if you look at over the term of the loan, it can save you a significant amount of money of you know making sure you've got the right rate for the loan. It can save you a significant amount of money of you know making sure you've got the right rate for the loan that you've taken out yeah, totally.

Speaker 1: 15:11

I think that that's a great example, very simple but very effective. Yeah, and obviously the larger the loan, the larger the saving that would be though exactly, exactly cool. So, but what are the? What are the catch? Yeah, yeah.

Speaker 2: 15:24

So you know we've we've spoke about the plus side. You know there's, you know there's always a positive but along with that is a negative. So the other things you need to consider really when you're doing the refinances is the other costs that sort of come along with refinancing. So if you're moving from one bank to another, you know you're going to get an arrangement fee with the lender, although there are banks in the market now that can arrange refinance without an arrangement fee. So what we do, we go out to the whole market and give you your different options, but there are banks out there that will do it without an arrangement fee. You also get the valuation of the practice again. Um, a bank would want to know that when they're lending against it is what the value of the goodwill is, or maybe the freehold, so they would need a valuation again. There are some lenders out there that don't need a valuation of the goodwill. So again it's, it depends on who you're talking to, but you will have some legal costs in there as well. So illegal costs will be your solicitor moving the security for the bank and acting for the bank to to put security in place. If you're just doing a refinance and it's like for like the, the legal cost shouldn't be that high because you're just moving in it for one bank to another. If you're using the same solicitor who did the work initially, again, that may save you.

Speaker 2: 16:52

But you know there are other costs that you need to factor in and then the early repayment penalties as well. So there are some business loans that have a an early repayment penalty. You need to understand that before you move moving any loans and you need to factor that into your costs. A lot of banks will have maybe like a timed early repayment penalty. It might be for a number of years, but there are other banks that do it for a you know the full term of the loan.

Speaker 2: 17:21

So again, you need to factor that in. There are some banks you may be able to push back on it if they're not lending anymore because you know they're sort of putting you in a position where you know you can't get any more funds from them. So in terms of treating customers fairly, how can they charge you a fee? If you're arranging a new loan, maybe to to purchase a second site or refinancing or and doing some expansion of where you are? You know you could possibly push back on them. So again, talk to us about that. We've got a lot of scenarios where we can certainly look at that and then we have we have successfully done that.

Speaker 1: 17:59

we have successfully been yeah, we've been very successful, yeah, where where people have been told there's early repayment charges, particularly with those banks that aren't in the sector anymore, and they'll think, oh, I can't move the loan. Oh, yes, you can. All right, we know how to do it, so get in touch if you're in that situation scenario. Yeah, definitely.

Speaker 2: 18:19

And then, in terms of extending the loan, you need to take into account, although you may save on a monthly amount which is great for your cash flow, you may over the term of the loans or pay more interest because if you're doing the loan over a longer period of time so if you only have like 10 years left but you do a new loan for 15 years obviously there will be extra interest on that. That you need to take into account. But you know it can still be worth doing if it's saving you money in terms of your working capital and, you know, helping your cash flow because obviously you are saving on those monthly costs. But these are things that you need to to bear in mind and I don't think it'd be right for us to sort of just give you all the upside and and not talk about the the possible. You know cons, that will be part of it yeah, for sure, um.

Speaker 1: 19:10

So what's next?

Speaker 2: 19:12

yeah. So what's next? So in terms of looking at this, so if you wanted, you know you've had a look at your existing loan agreement. You're you're happy to sort of move forward. You, what you need to do is explore with the lenders really, in terms of you know what's out there, what's in the market, the type of information that they'll need to see. So they'll need to understand your existing loan. So you know you might have a copy of your loan agreement or be able to sort of break down what your existing loan payments are.

Speaker 2: 19:40

Um, they'll need income and expenditure, so they'll need to understand what your income is, what your outgoings are, your assets, last couple of years of practice accounts, so they can get an idea of serviceability for the loan, tax returns. So I can see what you're taking Personal, business, bank statements and CVs. Really it's not a long list and a lot of this stuff you probably would have sort of ready already. Your bank statements now, especially with Xero, can be printed off quite quickly and your accounts will be up to date. So it's not a long list that you would need to put together. But that's basically the information that we would need to see to. But that's basically the the, the information that we would need to see to take anything forward for you okay, cool, cool, great, um, so can they do it themselves you can do it yourself.

Speaker 2: 20:34

I suppose. Yeah, yeah, if you're, if you've got the time to do it. I think the thing with us in terms of using a finance broker, like I put on that one time, have you got time to go to five or six different banks and get all the different terms from them and go through their, their applications? Um, the thing to bear in mind is with with ourselves is we've got the experience. So we have. I've worked in the bank for 20 years, worked for Samira for five years, nigel a lot longer.

Speaker 2: 21:04

I don't want to put a time on it, but you know we've got many years experience in terms of working in the banking sector and especially in health care. So we can gather all this information for you. We can structure the deal in a way that banks know and understand. Um, we will send it through to. You know, we'll send it to five or six different banks and get their offers. What happens is that they'll send back something called their offers and we'll put it into a comparison table so it will break down the you know how much they can do the term they can do the rate they can do the term they can do the rate they can do any security.

Speaker 2: 21:42

And when I talk about security security in terms of you know the business and we will present that back to clients in a nice professional way so they understand that you know they're getting the best in the market really they can see the terms that are out there. Unfortunately, if you go to one bank, they're not going to say, oh yeah, this is what we can do. But, by the way, there's a bank down the road that could probably do this at a percent lower or do it without a arrangement fee on refinance. So by going through us, you actually get all the different options available to you in the marketplace and then you can make a considered decision about you know who you want to go ahead. By going through us, you actually get all the different options available to you in the marketplace and then you can make a considered decision about who you want to go ahead with in terms of the finance.

Speaker 1: 22:33

OK, cool.

Speaker 2: 22:41

Yeah, I thought I'd just put this one in, really, because we're talking about, and you know, saving money in terms of repayments, but what I just want to talk about is cost savings that you can make with our buying group. So we created the buying group about four years ago now.

Speaker 1: 22:53

It must be um three years later. Three is it three years yeah.

Speaker 2: 22:57

So the buying group's been up and running. We've got over 100 um practices on the buying group, but basically it was formed to try and give practices the same sort of buying power that corporates get, because they've, you know, a large uh company, so are able to negotiate good prices with the buying group. Because we've got a lot of people on it, we're able to negotiate good prices for them and it basically helps them save money in terms of the practice. So, for see, we're trying to look at two things really. So you're looking at saving money in terms of your monthly loan repayments, but also have a look at what savings you can make in terms of running the practice, sort of going forward. Um, aaron, if you can just go to the next slide for me, sure, yeah.

Speaker 2: 23:43

So the buying groups, you know, 100% free to join. There's no hidden charges, no fees from us whatsoever, and basically our partners will give you a better deal by going through the buying group than they would if you went to them directly. So we've got a number of partners on there. So one of the most popular ones is consumables. So we've partnered with rights and you know our practices save money on their consumables orders. You know things that you need to pay for. You know to run your practice and you'll get a discount with rights. We've also got patient plans on there as well, so you may have a patient plan or been thinking about setting up a patient plan. Um, you know, we've got partners on there that can help you set one up from scratch or review your existing prices that you're paying and possibly put in place a cheaper deal for you getting the same level of service. But you know, saving money on that.

Speaker 2: 24:39

And then another popular one is utilities.

Speaker 2: 24:50

So, on utilities, we've got a company out there that can basically look at the utilities that you pay at the moment you know telecom, you know your electric, et cetera and they will go out to the market and they will look at all the different prices and all the different tariffs that are out there and present that back to you and again look to save you money in terms of your practice costs. I suppose the thing that you want to look at really is if you can save money on your practice costs, if you are maybe thinking of selling in the near future costs. If you are maybe thinking of selling in the near future, um, obviously, any savings that you could make in terms of that would add money onto your bottom line. So actually, if you were thinking of selling, if you can control those costs, you know that will help you because you know a lot of practices valuations are done on ebitda. So if you can um control that cost, then obviously that could add value to to your practice yeah, fair point, okay, and so in summary.

Speaker 2: 25:49

So in summary, yeah, so don't be afraid to look at your refinance options, you know. If it's something that you've been thinking about and you want to reduce your monthly costs, you know, just just reach out to us. You know we're more than happy to have a conversation with you about you know, what the possibilities are, what you could possibly save in terms of the practice. And I say it's the initial conversation is 100% free. You can speak to myself, you can speak to Aaron, you can speak to Nigel. We'll do evening calls. You know, like we're doing now, not really, you know. So we're quite free. We understand you're busy during the day, so we can do an evening call if that fits into. You know your busy schedules. And then, um, if you're looking to save money on your practice in terms of your costs, you know the buying group's free. Yeah, have a look at it, it's certainly worth doing, and say it's 100% free to join, and then just reach out to us.

Speaker 1: 26:46

Okay, thanks, ted. We've got a question here On a startup. I used all my available funds to buy the premises out of Ruppers. I found it difficult to secure finance and when I got an agreement in principle, the commercial mortgage rates were near 11% at that time. I've managed to secure finance for the kit out. However, I'm worried about cash flow. Or is it considered an unencumbered remortgage? Okay, how easy is this? Primarily because I've only owned the property for three months.

Speaker 2: 27:15

So is that the fit out side of things they want to look at?

Speaker 1: 27:19

I'm not too sure it could be the fit out or it could be for the actual property side, because they bought the property outright, yeah, and maybe they want to and they want to mortgage for that premises. So I think, bottom line, thank you. Firstly, thank you for the question. Okay, I don't want to give you the wrong advice here. My honest advice would be to reach out to Dan directly and he can look at what you've done exactly. You're right, the rates did go up to nearly 11% a little while back. They've come down now, so now could be a good time to get a mortgage on the property. Okay, is the cash flow to pay for the kit out? Yeah, okay, so yeah, I think the bottom line is Dan, maybe we can reach out.

Speaker 2: 28:10

Yeah, I'm more than happy to have a conversation about that, but is it unencumbered? So the actual freehold bit? You bought that outright Because you could gear up against thehold bit. You bought that outright Because you could really gear up against the freehold if you bought that outright.

Speaker 1: 28:26

Yeah, potentially Okay. I think that's one for you to take offline.

Speaker 2: 28:31

Yeah, I'm more than happy to reach out and have that conversation.

Speaker 1: 28:34

Yeah, let's do that. And on that note, our contact details are all here. Dan's the man really to talk to around financing. I can certainly help, but he's he's much better placed than I am. Um, as he does does it on a day by day basis, um, so dan's details are danfiracouk, and that's his number. Similarly, myself my details. There's also nigel, as dan mentioned. We do have people booking calls regularly. Most evenings we have calls with clients just to run through the various scenarios for clients. So then, to get a better idea. So on that note, any final points from you, dan, we're coming up to half an hour. I think it's a good time. We don't want to bore people too much.

Speaker 2: 29:18

Is that me boring people? Yeah, thanks, that is that me boring people? Yeah, thanks. Um, now I'll just say, if, if you've got um any questions or anything like that, yeah, just just reach out to me. I'm happy to sort of just go through in a call and then also I can get into the detail about what you're looking to do and and fully understand it and and try and help in any way we can right, okay, thank you.

Speaker 1: 29:38

Any final questions from anyone else, which I'll keep keep open for another couple of seconds. If not, we will wrap it up this evening. Thank you very much. Okay, thank you Thanks.

Speaker 2: 29:50

Bye.