What’s the next phase of your start-up?

31 Jan What’s the next phase of your start-up?

Starting a dental practice from scratch can be a long and challenging process, but it also comes with significant rewards.

One of the main benefits is that you can enter dental ownership at a much lower cost than purchasing an existing practice. However, this does mean that you need to build your patient base from the ground up.

Starting a dental practice isn’t easy. You need to design the site, branding, appoint builders, project manage the fit-out, order equipment, complete the CQC process, employ staff and fund all of this before the practice opens and generates any patient income.

There are lenders who understand this model and can help make the dream a reality. Finance can often be structured over the term of the lease, with interest-only periods of up to two years to give the business time to grow and become sustainable. We have helped many clients on this journey, and they have successfully turned start-ups into thriving practices.

One common challenge with start-ups is that lenders often have policies limiting funding to around 70% of total project costs. This means you need to inject your own funds into the transaction and also consider secondary finance. In many cases, this isn’t an issue, as the owner has the capital available.

But what happens at the next growth stage?

After trading for around 24 months, you may be looking to expand. Perhaps you initially fitted out one or two surgeries and now have space for another two or three. You want to complete these rooms so you can offer more services and generate additional income.

You may have already spoken to a dental equipment supplier and received costings for fitting out the new surgeries, but what next?

In this situation, many clients turn to short-term finance. This can be a useful way to access funds quickly, and we also offer this as a solution. It allows you to move forward with the new surgeries and start generating additional income.

However, while short-term finance can work well for equipment purchases, it is usually more expensive, particularly when borrowing over relatively short periods of three to five years.

Where issues can arise is when too much short-term finance is taken on. This can place significant pressure on cashflow and, in some cases, slow or even halt growth. High monthly repayments can limit your ability to recruit additional staff or invest in marketing.

So, what are the other options?

At this stage, you will now have a set of accounts and may be finalising your second year’s figures. This opens up more opportunities. Lenders will view you differently now that you have trading history and actual performance figures rather than projections.

You may be in a position to refinance the original start-up loan, increase the facility to fund the additional works, and secure a lower interest rate. In some cases, this can be done without a formal valuation of the practice, potentially saving thousands of pounds.

If you moved ahead quickly and used short-term finance to fund the additional surgeries, there may still be an opportunity to refinance that borrowing into a longer-term facility at a lower rate. This can significantly reduce monthly repayments and ease pressure on cashflow.

We have helped a number of practices that started from scratch and are now reviewing their monthly repayments. Recently, we reduced one practice’s repayments from around £11k per month to £6k per month, a substantial saving.

Not every situation is the same, but if any of this sounds familiar and you are reviewing your options, we would be happy to have a conversation. We can look at your current position, discuss your growth plans, and see whether there is an opportunity to support the next phase of your practice or reduce your existing monthly repayments.

It all starts with a call. Get in touch and we’ll be happy to discuss your options.