Can You Buy a Dental Practice with 90% Loan-to-Value?

Hi ,

I hope you’re well!

Taking the leap to becoming a principal dentist is a big milestone for any associate. As a first-time buyer, you might wonder if you can purchase a practice with a 90% loan-to-value (LTV). The answer is yes, but there's more to it than just the LTV. A crucial aspect is the serviceability of the loan, which is key for lenders when approving a loan facility.

Understanding Loan-to-Value (LTV)

LTV is a term used by lenders to describe the ratio of a loan to the value of the asset being purchased. For example, if you're buying the goodwill of a dental practice valued at £700,000 with a 90% LTV, the lender would finance £630,000, leaving you to cover the remaining £70,000 from your savings.

A higher LTV allows you to make a significant purchase with a relatively small initial outlay, which is particularly attractive for first-time buyers who may not have substantial savings.

The Importance of Serviceability

Securing a loan with a high LTV is just the first step. Lenders will closely examine the serviceability of the loan—your ability to make regular repayments based on the practice’s income and your personal finances.

Serviceability factors include:

• Practice Revenue: Lenders will review historical financial accounts to ensure the practice generates sufficient and consistent income.

• Expenses: Operational costs, including staff salaries, rent, utilities, and supplies, are taken into account.

• Personal Financial Health: Lenders will assess your personal credit history, existing debts, and overall living costs. Strong personal finances can improve your chances of securing a loan.

The net profit, after covering these expenses, is what will be used to service the loan.

Key Considerations for Aspiring Practice Owners

• Personal Financial Information: Lenders will require a breakdown of your monthly income and expenditure, tax returns, associate accounts for the last three years, a CV, and personal bank statements to understand your financial situation. 

• Practice Due Diligence: Conduct thorough due diligence on the practice you intend to purchase. Review financial accounts, management information, NHS contracts and the condition of equipment and facilities. 

• Professional Advice: Engage with finance brokers, accountants, and legal professionals who specialise in the dental sector. Their expertise can provide valuable insights and help you navigate the complexities of the acquisition process. 

Embarking on the journey to own your dental practice is both exciting and challenging. With the right knowledge and preparation, you can make informed decisions and secure a bright future as a principal dentist.

At Samera we have many years’ experience with helping clients purchase their firsts practice, if you want to have a free initial conversation with us to discuss a practice that you wish to purchase, then please get in touch.

You can book a consultation here.

Best wishes,
Dan