Why should you speak to a finance broker?

27 Aug Why should you speak to a finance broker?

Whether you’re buying your first practice or expanding an existing group, there’s one question that comes up time and again:

“I’ve banked with my bank for years. Shouldn’t I just speak to them first?”

It’s a perfectly logical place to start.

But healthcare lending in the UK has changed significantly over the past decade.

You can no longer simply walk into your local branch (if you still have one) and sit down with a bank manager to arrange a practice acquisition loan.

Healthcare lending is now largely handled by specialist teams, and getting in front of the right person within a bank isn’t always straightforward.

So, why does that matter?

Because lending in sectors such as dental, veterinary, pharmacy and care can look very different from a standard commercial loan. Transactions can involve a significant unsecured element, and lenders assess these deals according to their own credit appetite and approach to risk.

And importantly, not every lender views healthcare lending in the same way.

The limitation of approaching one bank

If you approach your existing bank directly, they can only offer you their own products.

They aren’t going to tell you if another lender could offer a better option.

For example:

• A more competitive rate – even a relatively small difference in pricing can have a significant impact over the life of a 15–20-year facility.
• A lower deposit requirement – some lenders are more comfortable with higher loan-to-value lending and in certain circumstances may be able to offer 100% funding.
• A faster route through credit – transaction timelines matter. Lenders operate at different speeds, from issuing terms through to credit approval and completing security documentation. This can make a real difference when you’re trying to get a deal over the line.
• A different deal structure – facility term, interest-only periods, security requirements and overall flexibility can vary considerably between lenders.

That isn’t a criticism of banks. It’s simply how the lending market works.

Every lender has its own credit appetite, policies, pricing and approach to risk.

If you only speak to one, you have no real way of knowing whether their offer is the most appropriate one for your circumstances.

Where a specialist healthcare broker adds value

A good healthcare finance broker does more than compare interest rates.

They should understand the healthcare lending market and, importantly, know which lenders are actively lending in your sector.

This can include:

• Accessing a panel of active healthcare lenders
• Understanding which lenders are currently lending in specific sectors
• Structuring applications in a way that works for credit teams
• Presenting EBITDA and add-backs appropriately
• Comparing offers side by side
• Explaining the commercial pros and cons of each option

The bigger point is that the cheapest rate isn’t necessarily the best deal.

The structure needs to work for what you’re trying to achieve.

• Are you buying a single practice?
• Are you planning to build a group of three or more sites?
• Are you likely to refinance in three to five years?

These are all things worth considering before deciding how you fund the acquisition.

The right structure at the outset can give you more options further down the line.

Is your bank ever the right option?

Absolutely.

In some cases, your existing bank may offer the best combination of pricing, structure and flexibility. As part of the process, your existing bank will often be approached alongside other lenders.

It makes sense to review the wider market first rather than assuming your existing bank is automatically the best option.

In healthcare transactions, relatively small differences in structure can have significant implications over the life of a loan.

Speaking to a broker first doesn’t mean you won’t use your bank.

It simply means you’ll know what else is available before making that decision.

Final thought

Healthcare practice acquisitions are rarely straightforward.

They can involve:

• Regulatory considerations
• Specialist valuations
• Significant unsecured lending
• Personal exposure
• And long-term plans for growth

Choosing how you fund the acquisition is one of the first structural decisions you’ll make.

Make sure it’s an informed one.