Funding to buy a dental practice, whether it is your first as an associate or an additional site for an existing group.
What you are actually buying
Most dental practice transactions have two components that lenders treat entirely separately.
Goodwill is the established patient base, the staff, the systems and the cash flow. On a typical practice it is the larger share of the price. It is intangible, which makes generalist lenders uncomfortable and is entirely routine to a healthcare lending desk.
The freehold, where the practice owns its premises, is conventional property security assessed on valuation.
They are funded on different terms within one transaction. Goodwill runs over a shorter period; the property element typically over around 25 years. Understanding that split before you agree a price matters more than the headline rate, because it drives your monthly cost. The practice loan calculator lets you model each element separately.
How the goodwill figure is arrived at
Goodwill is usually expressed either as a percentage of gross fee income or as a multiple of adjusted EBITDA, with multiple based valuations more common on larger practices and corporate style transactions.
The adjustment matters more than the multiple. A valuer will normalise the accounts by replacing the outgoing principal’s drawings with the cost of an associate doing the same clinical work, and by stripping out expenses that will not continue under new ownership. A practice where the principal works five days a week and takes modest drawings can look very different once that adjustment is made.
Deals reprice at this stage more often than they do at valuation, so it is worth understanding the basis before you agree a figure. See how dental goodwill is valued.
How much you can borrow
Appetite in dentistry is strong. Lenders view it as a resilient, essential service with predictable income and low failure rates, and for well-structured purchases high loan-to-value funding is available against both goodwill and freehold.
What is achievable on your case turns on whether the target practice’s profitability comfortably services the borrowing, assessed on actual trading rather than your projections for it.
What the NHS contract tells a lender
On an NHS or mixed practice, the contract is the first thing an underwriter reads. In England and Wales that means the Units of Dental Activity on the contract and the value paid per UDA, because together they set the floor under the practice income. A high UDA rate on a stable contract is the strongest asset in the deal, ahead of the premises.
Recent contract performance is examined alongside it. Persistent underdelivery against the contracted UDAs, and any clawback that followed, is a problem because it signals the income in the accounts is not repeatable. Overdelivery is not automatically a positive either, since the practice is doing work it is not paid for.
On a wholly private practice there is no contract to underwrite, so the lender falls back on trading accounts, patient numbers, the plan book if there is one, and how much of the fee income depends on the outgoing principal personally.
Your contribution does not have to be all cash
Deposit requirements vary considerably between lenders, and a cash deposit is not the only route. Equity in a property you already own can sometimes count towards the overall stake a lender wants to see.
That matters more than it sounds. Keeping cash back at completion funds the improvements that grow the practice in year one, and is usually worth more to you than a marginally better rate.
If that equity is in your own home, raising money against it is usually a regulated mortgage, which we do not arrange. Where that is the right route, we will say so and point you to an appropriately authorised adviser.
The unsecured alternative
Professions lending specifically naming dentists is now available from £30,000 to £500,000, with growth facilities up to £2m, at rates from around 8% and with no property or asset security.
For a smaller acquisition, or to fund the deposit contribution on a larger one, that can be a cleaner structure than stretching a secured facility. It is worth modelling both. See what is a professions loan.
Leasehold practices and the lease term
Where the practice is leasehold, the lease becomes a credit issue in its own right. A lender writing a facility over fifteen years against a lease with eight years left will want to see a right to renew, and will often make a lease extension a condition of the offer.
Because the landlord controls that timetable, it sits outside your control and regularly becomes the last item holding up completion. Raise it at heads of terms rather than at offer stage.
What lenders will want to see
- The vendor’s accounts, ideally three years, plus current management figures
- The income mix: NHS contract versus private, and the split by treatment type
- How dependent the practice is on the departing principal, and what happens to that patient list
- Associate contracts and how secure the clinical team is
- Your own position: deposit available, existing borrowing, and your track record as an associate
- Your plan for the first two years
That last point is where first-time buyers most often let themselves down. A lender is not looking for ambition; it is looking for evidence that you understand the practice you are buying.
Timeline
The finance is rarely the slowest part. Agreement in principle can be quick. Valuation, due diligence, CQC registration or variation, and conveyancing set the real pace, and in Scotland the process differs because of the missives system. See buying a practice in Scotland.
In England, CQC registration does not transfer with the sale. The buying entity has to register in its own right and completion cannot happen before that is in place, which makes it the single most common cause of a delayed completion date. Start the application as soon as heads of terms are signed rather than waiting for the finance offer, because the two run on different clocks and only one of them is in your control.
Getting terms agreed early means you are not the reason for a delay, and it strengthens your position with the vendor.
Budget beyond the purchase price
The price is rarely the whole requirement. Buyers routinely need working capital for the first few months, because NHS payments and private receipts do not always arrive in the pattern the outgoing principal was used to, and there is usually equipment that needs replacing sooner than the vendor suggested.
Chairs, imaging, CBCT scanners, autoclaves and surgery refits are fundable separately on dental equipment finance, which keeps that cost off the purchase facility and matches the repayment term to the life of the kit. Raising the acquisition loan and the equipment funding together, rather than returning to the same lender three months later, generally produces a better outcome.
Common questions
How much deposit do I need?
It varies widely between lenders, and some will consider a lower cash contribution where you have other assets to bring into the calculation. Because the range is so wide, this is exactly the question that comparing several lenders answers better than going to your own bank alone.
Will the lender take a charge over my home?
Often not. Specialist healthcare lenders will commonly lend against the practice’s goodwill and equipment rather than requiring residential security. Where a lender does ask for it, that is usually a signal to test the market rather than accept.
Will I need life cover?
Frequently, as part of the security package. We flag the requirement at the outset so it does not hold up completion. We do not arrange insurance, so you would put the cover in place through your own adviser.
Can I buy a practice as a first-time owner?
Yes, and it is more achievable than most associates expect. The case has to be presented properly, but lenders actively want well-prepared first-time buyers in this sector. A first purchase is not treated as a start up, because you are clinically qualified and the business already trades.
Does a short lease affect the finance?
It can. A lender writing a facility over a long term against a lease with only a few years left will usually want a right to renew, or will make a lease extension a condition of the offer. Because the landlord sets that timetable, it is worth raising early rather than at offer stage.
See also: goodwill finance, dental commercial mortgages and our guide to how goodwill is valued.
All figures are indicative and subject to lender assessment, your circumstances, valuation and prevailing market conditions. Commercial mortgages and unregulated bridging loans are not regulated by the Financial Conduct Authority. Property offered as security may be at risk if you do not keep up repayments.