March 23, 2026 • 23 mins
UK Dentists: Collect your verifiable CPD for this episode here >>> https://courses.dentistswhoinvest.com/smart-money-members-club
———————————————————————
Interest rates have spooked a lot of dentists into hitting pause on practice ownership, but that pause can quietly become a habit. We talk through a calmer way to think about buying your first dental practice in the UK, using the lens lenders actually use: long-term serviceability, realistic stress-testing, and the underlying performance of the practice itself rather than a single base-rate snapshot.
Kevin, a specialist dental finance broker, shares what he has seen in the market over the last few years, including why first-time buyers all but disappeared when rates rose and why goodwill values softened at the same time. We dig into the idea that a practice purchase is usually a 15 to 25 year commitment, so “waiting for the perfect rate” can be the wrong game. If the numbers work today, banks typically model affordability at higher rates anyway, and the real question becomes whether the practice can fund the debt and still pay you what you need.
We also get honest about what new owners struggle with most. It’s often staff, leadership, and the first-year reality that you may earn less while you stabilise and grow the business. From there we move into practical funding detail: longer goodwill terms, renewed bank appetite, and when 100% finance is possible, including how loan term choices can matter more than small rate differences. We finish with what lenders look for in your personal finances, CV, and “background assets” like property, ISAs, pensions, or cash, plus what changes when you buy a second practice and how you split your time.
If you found this useful, subscribe for more UK dentist finance and practice ownership conversations, share it with a colleague who’s thinking about buying, and leave a review with the one question you want answered next.
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Disclaimer: All content on this channel is for education purposes only and does not constitute an investment recommendation or individual financial advice. For that, you should speak to a regulated, independent professional. The value of investments and the income from them can go down as well as up, so you may get back less than you invest. The views expressed on this channel may no longer be current. The information provided is not a personal recommendation for any particular investment. Tax treatment depends on individual circumstances and all tax rules may change in the future. If you are unsure about the suitability of an investment, you should speak to a regulated, independent professional. Investment figures quoted refer to simulated past performance and that past performance is not a reliable indicator of future results/performance.
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Dr James (01:47):
We're gonna cover all of that in the middle of that.
What means since we left bothwhat we need to know in 2020?
And how do things just be goingforward?
And going to the practiceexpert.
Finance experts.
Mr.
Kevin Saunders we're gonna begoing through in all of the
above and a whole lot more aswell as episodes ever.
As never you can claim your CPDfor this episode within the
(02:07):
official Dentists Who InvestSmart Money Members Club.
Smart Money Members Club alsoincludes multiple money posts in
the webinar series of financepotential, including
how to become as tax effecientpossible as well as
understanding investing.
All of this content comments atverifiable CPD, and you can
download your certificates thenand then on completely.
In addition to this, we alsoinclude a whopping 10% discount
(02:31):
in your dental indemnity and 5%discount on lab builds for
dental principles, amongst otherparts and discounts for
members.
Please use the link in thedescription to claim your
verifiable CPD for this episode.
Well, we're here today to talkabout exactly what we said on
(02:51):
the 10, which is banning firstpractice, but we don't want to
not make some people feelincluded.
So this a lot of this stuff isgonna apply to banning your
second practice and things alongthose lines as well.
But we're we're certainlycoming at it from that angle,
and there's some very importantstuff to know.
So, Kevin, I think what'ssensible, obviously the audience
know you, you've been on thepodcast more than a few times,
(03:12):
which is great.
And I think what is sensible isto just maybe have a little bit
of a recap, high level, of howfinance works, because that's
really useful.
A wise man once said we need tobe reminded more than we are
taught, and I'm definitely anagreeer of that philosophy.
And then what we can do is wecan maybe jump into some of the
caveats for people who are doingit the first time and a whole
(03:33):
lot of other stuff as well.
What uh what about that?
Feel free to shoot me down ifyou think that doesn't sound
like a good idea.
Kevin (03:39):
Yeah, I think it's fine, and we are gonna cover topics
that are relevant for bothfirst-time buyers and um people
buying second or third practice.
Um what's interesting aboutfirst-time buyers though is that
uh there've been far fewer ofthem around for the last I'm
gonna say four years, um, sincethe interest rates started going
(04:00):
up.
Um and I I'm uh quite a goodbarometer of the market because
I I'm independent, um, I'm notowned by one of the dental sales
agents.
Um so um I could see um theminute um the interest rate
started rising, there was adrop-off in inquiries from
first-time buyers.
Um so a lot of what I've beendoing over the last four years
(04:23):
has been people buying secondand third practices.
Not to say we didn't help somepeople buying their first
practice, but uh far fewer, andI can only say it was about the
interest rates.
So um that's interestingbecause it links back into the
podcast we did recently oninterest rates.
Uh and I I guess what I wantedto say was um it's a bit like
(04:43):
investing, and you'll be you'llknow more about this than me.
Um, but probably a really goodtime to have bought a practice
has been over the last couple ofyears because goodwill values
went down, but many associateswere afraid to do so because
interest rates they perceived tobe high.
Um so uh first thing to say isyou're when you buy a practice,
you're gonna get funding over 15to 25 years.
(05:04):
So it's not really about justthe current period you're in.
I mean, obviously it's alwayshelpful if the first couple of
years you have lower interestrates, um, but it's a bit like
investing.
You're you're doing this forthe you know the medium term.
So um you should have this allcosted out based on current
interest rates and the fact youjust want to buy a practice and
(05:26):
not sit back and wait justbecause you think you know the
base rate might come down by oneor two percent.
Dr James (05:31):
Um I'm a bit I think that how can I say this?
We d we that it's definitely afactor, right?
But you know, how I would lookat it is this, right?
I think that a big a big lessonfor me was that in business, a
lot of success in business isabout the lessons, and you
really want to get the lessonsas soon as you can, even if a
(05:53):
lesson looks like failure.
That's you know, we're eitherwe're the winner we learn,
right?
So, yeah, obviously we don'twant to sit be irresponsible and
encourage people to make rashdecisions and go bankrupt, of
course.
But I think that it's a veryit's an interesting way of
looking at it in that really thesooner we can learn these
things and sooner we get on withit, the sooner that we can be
successful effectively and maybenot put things off because we
(06:16):
think that there's some sort ofmarket condition that isn't in
our favor.
Because I think that you canovercome really there's that
saying, and it's like when thetide goes out, okay, you find
out who's wearing underwear andwho isn't, right?
You know, and don't get mewrong, it definitely makes
things harder.
But at the same time, if yourbusiness is resilient enough and
you're skilled enough andyou're you've controlled a lot
of the other variables whichcontribute towards success, you
(06:38):
can still pull it off, in myopinion.
Of course, it definitely makesthings harder, and I definitely
don't want to go anybody foranybody to listen to this
podcast to make some rashdecisions today.
But what I do want to do isjust chuck in some little wisdom
that they might considerwhenever it comes to thinking
and not maybe purely make thatdecision off the back of
interest rates, as you weresaying.
Kevin (06:56):
So on that note, I mean, what I and the banks would do um
is we would we would cost thisout basically.
When someone looks to buy apractice, we're considering this
based on higher interest ratesthan the current rate.
Um, so the bank won't lend themoney unless they know that
somebody can draw the salarythey need to to live on and
(07:17):
service their debt at higherinterest rates than the current
rate.
So they've already had a sensecheck.
But I was just thinking aboutthis, and it's almost like
investing in the market, isn'tit?
So when confidence is low andthe prices are all dropping, no
one wants to invest.
But the smart people knowthat's the time to invest.
Uh, you know, that is the timeto jump in.
(07:37):
And that's how I kind of feelthe market's been in the dental
world for the last couple ofyears.
Goodwill values did go down.
It was probably the perfecttime to have bought, and now
they're going up again.
Um, and people have been ummore willing to jump in, or
first-time buyers have, becauseinterest rates drop down,
although you know, who knowswhat's going to happen now going
forwards.
But it got me on thinking aboutactually that's the wrong way
(08:00):
to think because you're you'retaking on a 15-year commitment.
So it's not just about what therates are doing for the next
year, helpful as it is to havelow rates when you first buy.
So I guess that was the firstpoint.
Uh so I've seen a return infirst-time buyers in recent
times.
Um, and I think it's it's goingback again to what we talked
about, just understanding thatinterest rates, the new norm is
(08:22):
going to be back to how thingswere before the credit crunch,
which is the base ratefluctuating between something
like three to six percent, youknow, it's it's gonna go up and
down, isn't it?
And we you know, we wereforecasting rate cuts this year,
and already since the podcastyou and I did, that's already
changed because of uh Trump'slittle adventure.
And uh and now they'reflatlining, and and I think the
(08:42):
market's saying they'reforecasting a rise next year.
Um, so you can't sit back andwait forever.
If the time is right to buy apractice, it's about looking at
the financials of thatparticular practice and can it
afford to serve as the debt andpay you the salary that you
want.
Dr James (08:59):
So uh little piece of wisdom on that as well.
Just just wanted to jump in andsay one thing before we move
on.
I was talking to a guy, itfigure loops company, the other
day.
Maybe some people who arelisteners can figure out who
that is in UK dentistry, and hesaid to me, he was like, you
know, a big part of business isyou stay in the game for long
enough until you effectivelyjust get lucky and things shift
(09:23):
in your favour.
And I that actually kind of youknow, it's not the only factor,
right?
But I think people have tounderstand it's more about time
in the game than timing the gamea lot of the time.
Uh and that applies to themarkets and also business as
well.
Yeah.
And um what is that othersaying?
What preparation?
So I um luck is whenpreparation meets opportunity,
(09:44):
right?
You kind of sow the seeds, andthen when the time comes, you
can you can leap on it.
And like I say, I'm not sayingthat what I'm saying just means
that everybody should just goand start dental practices or do
all of that.
I'm just saying that these aresome alternate perspectives that
are worth considering as well.
And maybe just I definitelythink it's not good to just you
know, to think in binary terms.
Are interest rates good?
(10:05):
Yes, I'm gonna start apractice, are they bad?
Yes, therefore I'm not gonnastart a practice.
You know, it's there's more toit than that.
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Kevin (12:02):
No, no, definitely.
And I was going to say the moreinteresting thing to think
about are the challenges ofownership rather than the
interest rates.
I think not enough people thinkabout that.
Um, it's things like the issueswith staff.
You take a practice on, you'vegot to learn a lot about dealing
with staff.
You might have some difficultstaff, you might have staff
leaving.
Those are the issues really,uh, which most dentists who buy
(12:25):
a practice will come back aftera year and say that that's what
what yeah, that was the hardestchallenge.
It wasn't paying the bank loanback, it was it was coping with
staff.
Um or uh or the fact thatpeople also need to realize that
if they really want to buytheir own practice, often in the
first year they may earn lessthan they did as an associate.
Yeah, for the longer term gain,you you might have to tighten
(12:48):
your belt for a year or two uhand just get your hands dirty
and get in there and andsacrifice a bit of your salary
to build the business becausethat's what it's all about.
Dr James (12:57):
Boom, there we go.
Kevin (13:00):
And another point on that as well is um it's really
important, I think, when youtake a practice on to surround
yourself with professionaladvisors and pay for them.
Um I've always noticed thedentists that don't want to pay
for professional advice, they'llbe okay because they're
dentists and and you know,dentistry is a great business.
But 100% of the time, thepeople that pay for professional
(13:20):
advice end up taking that extrastep up and earning more money
because they're they're and wewere talking about this earlier,
outsourcing some of their workto other people and leaving them
to do what they do best.
Um yeah, so to my mind, it'smore important to think about
the challenges of ownership thanit is just the most recent
interest rates.
You you you know, we'll costout the financials in any
(13:43):
practice, and you have to lookat a few practices before you
find the right one.
And that that's the point youwere making a moment ago.
Don't just jump on a practice,but go and find the right one.
It's like buying a house.
You know, there'll be one therethat just fits.
Um, so uh so that's allimportant.
And then back to the funding, Imean that the the banks at the
moment are very keen to assist.
We've had you know, we'vetalked about all these different
(14:03):
products over various uhpodcasts recently, but there's
real appetite there from thebanks to help first-time buyers.
You know, we've got um we'vegot terms extended from 15 up to
20 years on goodwill purchases,we've got 100% finance for
people that may have bought aproperty and have you know
struggled to put aside extramoney to for the deposit on a
(14:25):
practice.
Um, we've even got productswith no valuation fees and no
legals, which uh which is justamazing, really.
None none of these productswere there a couple of years
ago.
So there is real assistance nowfor people buying their first
practice, and you know,especially to my mind, the bit
about terming the finance outover a longer period, um, which
helps keep your monthly paymentsdown.
(14:46):
Because I think the banks haverecognised that very few people
actually keep their loan for 15years, they're always going to
refinance because they'rerefurbing, they're buying a
second practice, they're orthey're selling or doing
whatever.
So um so yeah, the fact theycan actually extend to 20 years
and often go over the term ofthe lease as well, I think it's
a game changer.
(15:07):
So um so that's reallyimportant.
Um in terms of what people needto do to approach the banks,
again, things we've talked aboutbefore, but it's it's you know,
if you are gonna come in formoney, make sure you run your
personal finances well, don'thave unpaid fees on your bank
statements, um, look at your CV,and we're happy to look at that
(15:28):
over with you as well, and tryand get some sort of management
experience on there.
Um, and think about your yourbackground assets as well.
Uh the banks will accept if youhaven't got any background
assets but you've got a load ofcash that accepts that you've
you've done something with yourmoney.
If you've got no backgroundassets and no cash, you're
obviously going to be a morerisky bet for them because the
the first question is as adecent earned dentist, where's
(15:51):
all the money going?
Dr James (15:52):
Uh so uh what can what qualifies as a background asset
in their eyes?
Kevin (15:57):
Oh, good question.
Yeah, so I mean, obviously,property is the main one.
If you've bought your ownresidence, even if the mortgage
is quite high on it, you'veobviously put the deposit into a
property.
Uh, you may have ISAs,pensions, anything to show that
what you haven't got is a bigsalary and a load of debt, a
load of personal debt.
Um Right.
Dr James (16:17):
So they they actually yeah, okay, that's kind of what
I was curious about.
Like ISA's pensions, theyactually take this into
consideration, right?
And prop property I kind ofget, that's like very
traditional, isn't it?
But yeah, they'll even look atyour your paper assets as in
your stocks and bonds portfolioand your pension and your ISA.
Kevin (16:36):
Definitely, yeah.
And I said a lot of personaldebt, obviously a mortgage is is
personal debt, and the bankswill accept that you've actually
bought an asset with it.
What they don't want is peopleuh earning big salaries and not
buying assets.
They're they're buying okay, acar isn't really an asset, is
it?
It's a depreciating asset.
So if you're spending a lot ofmoney on cars and personal loans
and lifestyle, then it doesn'tbode well for somebody to be
(16:59):
able to take a bit of a salarycut and launch into owning a
business.
So um so that's really how theylook at things.
Dr James (17:07):
Good to know.
I thought you were gonna talknext.
I didn't want to interrupt, Ithought you were in full flow.
Okay, cool.
So you've given us a little bitof an idea as to I guess the uh
assessment process, right?
And um that's fine, good toknow.
(17:29):
And you might have said this isthat any different for someone
who's who's acquiring a practicefor the first time versus the
second time, or is it roughlythe same parameters?
Kevin (17:37):
So on the personal side, it's pretty much the same.
They're gonna look at the sameinformation.
On the business side, obviouslythere's a business to assess
that the applicant already owns.
So they'll be looking at theexisting business and what the
applicant's done with that sincepurchase.
So a very easy win or quick winwill be raising the fees up and
(17:58):
raising the profit up.
Uh, obviously that owes reallywell.
It means that the goodwillvalue of the practice is
increased, and you can leverageagainst that to buy a second
practice then as well.
Although, as I said earlier,there's also 100% finance
available on the target practiceas well.
Um the bigger question forexisting practice owners is how
(18:20):
they're going to split theirtime.
So we've got to be able to showhow um the applicant can
actually spend a reasonableamount of time in their existing
practice and be in the newpractice to grow it as well.
So of interest to a lenderwould be how a principal dentist
(18:48):
or an existing practice ownersplits their time.
Um the banks don't really likefunding for a second practice
that's going to beassociate-led.
Or not they don't like funding,but the loans of values are
likely to drop down quite a lotbecause it seems an investment
business.
So it's quite important for usto have the correct story about
how a principal can um can spenda few days in the new target
(19:11):
practice, but also not drop uhtheir income not to drop in
those in their existingpractice.
Um, because they'll obviouslyhave to pay an associate to
cover some of their time ifthey're working five days a
week.
So that's the calculation thatwe have to look at very
carefully for someone buying asecond practice.
Dr James (19:29):
Nice, which obviously is much less of a consideration
if it's associate led, right?
And they're they'll they'llfactor that in as well, right?
Kevin (19:39):
Yeah, yeah.
I mean it we we the bestapplication for the banks is
that somebody's gonna spendtheir time in both practices uh
rather than having one that'sassociate led.
Uh the minute it's associateled, as I said, it's viewed as
uh an investment business andthe loans of value is gonna be
lower.
Dr James (19:57):
I'm glad I asked.
There we go.
Kevin, we talked about 100%finance on one of the previous
podcasts, and that's interestingfor two reasons.
One because a lot of peopledon't know that it's possible,
as in you can borrow 100% of thegoodwill and the property,
right?
Kevin (20:16):
Yeah, property isn't nearly always 100% as long as
the financials demonstrateserviceability.
Um, but the goodwill is quiterecent, uh, and we've got two to
three banks now looking atthat, um, particularly for
first-time buyers.
Uh, and as we said before, youcan generally get 100% finance
as a second practice ownerbecause you use your existing
(20:38):
practice and leverage on that,use the goodwill value there.
Um so, what looks good to abank for a first-time buyer, as
we said earlier, it's somebodythat's got some background
assets, uh, either cash orproperty, etc.
Um, also who demonstrates thatthey are a food good fee grocer
(20:58):
and can step into the shoes ofthe principal and basically run
the practice.
Uh so those are the key points.
Um but but it's nice to see thebanks recognize that buying a
property involves putting a lotof cash in as a deposit.
So therefore, people oftenhadn't got the uh the level of
cash needed when they look fortheir first practice.
Dr James (21:21):
There you go.
And then that's interesting forthat reason.
And then also as well as that,well, we we kind of touched upon
this anyway.
Who is who is suitable for it?
But I guess you kind of justsaid that really, didn't you?
It's it's it it you know,anyone can get it in principle,
uh, even now first-time bars,right?
Kevin (21:38):
Yeah, so it's it's about the CV a little bit there as
well.
Someone who's got a few years'experience under their belt,
built up of um built up some uhsome kind of background assets
um and buying their firstpractice, yeah.
Dr James (21:51):
I guess the other obvious question to ask is is
the interest rate?
I know an interest rate is notobviously going to be the only
factor that determines yourrepayments, but are the interest
rates higher?
Or are the no better questionare the repr are the repayment
terms less favorable on 100%finance?
Because that includes theduration and also the interest
rate.
Kevin (22:11):
Does and actually the interest rate is often far more
affected by the term of theloan.
So the interest rate may behigher on a 20-year loan to a
15-year loan.
However, the monthly paymentson a 20-year loan are going to
be cheaper, which is probablythe more important factor for
anyone buying.
So everything has an effect oninterest rate because the banks
(22:33):
have um interest ratecalculators and they throw all
the information in.
So um yeah, 100% would affectthe interest rate, but but not
so much.
You know, it'd be you know afraction of a percent.
So um, yeah, not to my mind,not worth worrying about.
And getting 100% is fantasticbecause the bank's buying the
asset for you.
Dr James (22:52):
And that's that's exactly what I was after when I
asked that question.
Like obviously it's it's alwaysgonna be a little bit lick your
finger, put it in the air.
But even you saying it's not somuch is reassurance, right?
Because I would have justassumed that it's a lot more, or
they somehow charge you a lotmore, but you're not saying that
that's the case necessarily forthe science of it.
Kevin (23:12):
Not particularly, no.
Um, so as I said earlier, theum the term look alone does
affect it, and the rate tends tobe slightly higher for a
20-year term on goodwillcompared to a 15 year term.
But I always tell clients it'sabout your monthly payments.
If you pay a slightly higherinterest rate on a 20 year term,
but your payments are a lotcheaper, that's got to be worth
going for, hasn't it?
(23:32):
You can always make lump sumrepayments to the loan each year
if you've got surplus cash topay it off quicker.
So if anyone's interested incontacting us to talk about
finance.
Uh you can reach me at kevin atsaroma.co.uk or mobile number
0780 144 0622.
(23:53):
So
We're gonna cover all of that in the middle of that.
What means since we left bothwhat we need to know in 2020?
And how do things just be goingforward?
And going to the practiceexpert.
Finance experts.
Mr.
Kevin Saunders we're gonna begoing through in all of the
above and a whole lot more aswell as episodes ever.
As never you can claim your CPDfor this episode within the
(02:07):
official Dentists Who InvestSmart Money Members Club.
Smart Money Members Club alsoincludes multiple money posts in
the webinar series of financepotential, including
how to become as tax effecientpossible as well as
understanding investing.
All of this content comments atverifiable CPD, and you can
download your certificates thenand then on completely.
In addition to this, we alsoinclude a whopping 10% discount
(02:31):
in your dental indemnity and 5%discount on lab builds for
dental principles, amongst otherparts and discounts for
members.
Please use the link in thedescription to claim your
verifiable CPD for this episode.
Well, we're here today to talkabout exactly what we said on
(02:51):
the 10, which is banning firstpractice, but we don't want to
not make some people feelincluded.
So this a lot of this stuff isgonna apply to banning your
second practice and things alongthose lines as well.
But we're we're certainlycoming at it from that angle,
and there's some very importantstuff to know.
So, Kevin, I think what'ssensible, obviously the audience
know you, you've been on thepodcast more than a few times,
(03:12):
which is great.
And I think what is sensible isto just maybe have a little bit
of a recap, high level, of howfinance works, because that's
really useful.
A wise man once said we need tobe reminded more than we are
taught, and I'm definitely anagreeer of that philosophy.
And then what we can do is wecan maybe jump into some of the
caveats for people who are doingit the first time and a whole
(03:33):
lot of other stuff as well.
What uh what about that?
Feel free to shoot me down ifyou think that doesn't sound
like a good idea.
Kevin (03:39):
Yeah, I think it's fine, and we are gonna cover topics
that are relevant for bothfirst-time buyers and um people
buying second or third practice.
Um what's interesting aboutfirst-time buyers though is that
uh there've been far fewer ofthem around for the last I'm
gonna say four years, um, sincethe interest rates started going
(04:00):
up.
Um and I I'm uh quite a goodbarometer of the market because
I I'm independent, um, I'm notowned by one of the dental sales
agents.
Um so um I could see um theminute um the interest rate
started rising, there was adrop-off in inquiries from
first-time buyers.
Um so a lot of what I've beendoing over the last four years
(04:23):
has been people buying secondand third practices.
Not to say we didn't help somepeople buying their first
practice, but uh far fewer, andI can only say it was about the
interest rates.
So um that's interestingbecause it links back into the
podcast we did recently oninterest rates.
Uh and I I guess what I wantedto say was um it's a bit like
(04:43):
investing, and you'll be you'llknow more about this than me.
Um, but probably a really goodtime to have bought a practice
has been over the last couple ofyears because goodwill values
went down, but many associateswere afraid to do so because
interest rates they perceived tobe high.
Um so uh first thing to say isyou're when you buy a practice,
you're gonna get funding over 15to 25 years.
(05:04):
So it's not really about justthe current period you're in.
I mean, obviously it's alwayshelpful if the first couple of
years you have lower interestrates, um, but it's a bit like
investing.
You're you're doing this forthe you know the medium term.
So um you should have this allcosted out based on current
interest rates and the fact youjust want to buy a practice and
(05:26):
not sit back and wait justbecause you think you know the
base rate might come down by oneor two percent.
Dr James (05:31):
Um I'm a bit I think that how can I say this?
We d we that it's definitely afactor, right?
But you know, how I would lookat it is this, right?
I think that a big a big lessonfor me was that in business, a
lot of success in business isabout the lessons, and you
really want to get the lessonsas soon as you can, even if a
(05:53):
lesson looks like failure.
That's you know, we're eitherwe're the winner we learn,
right?
So, yeah, obviously we don'twant to sit be irresponsible and
encourage people to make rashdecisions and go bankrupt, of
course.
But I think that it's a veryit's an interesting way of
looking at it in that really thesooner we can learn these
things and sooner we get on withit, the sooner that we can be
successful effectively and maybenot put things off because we
(06:16):
think that there's some sort ofmarket condition that isn't in
our favor.
Because I think that you canovercome really there's that
saying, and it's like when thetide goes out, okay, you find
out who's wearing underwear andwho isn't, right?
You know, and don't get mewrong, it definitely makes
things harder.
But at the same time, if yourbusiness is resilient enough and
you're skilled enough andyou're you've controlled a lot
of the other variables whichcontribute towards success, you
(06:38):
can still pull it off, in myopinion.
Of course, it definitely makesthings harder, and I definitely
don't want to go anybody foranybody to listen to this
podcast to make some rashdecisions today.
But what I do want to do isjust chuck in some little wisdom
that they might considerwhenever it comes to thinking
and not maybe purely make thatdecision off the back of
interest rates, as you weresaying.
Kevin (06:56):
So on that note, I mean, what I and the banks would do um
is we would we would cost thisout basically.
When someone looks to buy apractice, we're considering this
based on higher interest ratesthan the current rate.
Um, so the bank won't lend themoney unless they know that
somebody can draw the salarythey need to to live on and
(07:17):
service their debt at higherinterest rates than the current
rate.
So they've already had a sensecheck.
But I was just thinking aboutthis, and it's almost like
investing in the market, isn'tit?
So when confidence is low andthe prices are all dropping, no
one wants to invest.
But the smart people knowthat's the time to invest.
Uh, you know, that is the timeto jump in.
(07:37):
And that's how I kind of feelthe market's been in the dental
world for the last couple ofyears.
Goodwill values did go down.
It was probably the perfecttime to have bought, and now
they're going up again.
Um, and people have been ummore willing to jump in, or
first-time buyers have, becauseinterest rates drop down,
although you know, who knowswhat's going to happen now going
forwards.
But it got me on thinking aboutactually that's the wrong way
(08:00):
to think because you're you'retaking on a 15-year commitment.
So it's not just about what therates are doing for the next
year, helpful as it is to havelow rates when you first buy.
So I guess that was the firstpoint.
Uh so I've seen a return infirst-time buyers in recent
times.
Um, and I think it's it's goingback again to what we talked
about, just understanding thatinterest rates, the new norm is
(08:22):
going to be back to how thingswere before the credit crunch,
which is the base ratefluctuating between something
like three to six percent, youknow, it's it's gonna go up and
down, isn't it?
And we you know, we wereforecasting rate cuts this year,
and already since the podcastyou and I did, that's already
changed because of uh Trump'slittle adventure.
And uh and now they'reflatlining, and and I think the
(08:42):
market's saying they'reforecasting a rise next year.
Um, so you can't sit back andwait forever.
If the time is right to buy apractice, it's about looking at
the financials of thatparticular practice and can it
afford to serve as the debt andpay you the salary that you
want.
Dr James (08:59):
So uh little piece of wisdom on that as well.
Just just wanted to jump in andsay one thing before we move
on.
I was talking to a guy, itfigure loops company, the other
day.
Maybe some people who arelisteners can figure out who
that is in UK dentistry, and hesaid to me, he was like, you
know, a big part of business isyou stay in the game for long
enough until you effectivelyjust get lucky and things shift
(09:23):
in your favour.
And I that actually kind of youknow, it's not the only factor,
right?
But I think people have tounderstand it's more about time
in the game than timing the gamea lot of the time.
Uh and that applies to themarkets and also business as
well.
Yeah.
And um what is that othersaying?
What preparation?
So I um luck is whenpreparation meets opportunity,
(09:44):
right?
You kind of sow the seeds, andthen when the time comes, you
can you can leap on it.
And like I say, I'm not sayingthat what I'm saying just means
that everybody should just goand start dental practices or do
all of that.
I'm just saying that these aresome alternate perspectives that
are worth considering as well.
And maybe just I definitelythink it's not good to just you
know, to think in binary terms.
Are interest rates good?
(10:05):
Yes, I'm gonna start apractice, are they bad?
Yes, therefore I'm not gonnastart a practice.
You know, it's there's more toit than that.
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Kevin (12:02):
No, no, definitely.
And I was going to say the moreinteresting thing to think
about are the challenges ofownership rather than the
interest rates.
I think not enough people thinkabout that.
Um, it's things like the issueswith staff.
You take a practice on, you'vegot to learn a lot about dealing
with staff.
You might have some difficultstaff, you might have staff
leaving.
Those are the issues really,uh, which most dentists who buy
(12:25):
a practice will come back aftera year and say that that's what
what yeah, that was the hardestchallenge.
It wasn't paying the bank loanback, it was it was coping with
staff.
Um or uh or the fact thatpeople also need to realize that
if they really want to buytheir own practice, often in the
first year they may earn lessthan they did as an associate.
Yeah, for the longer term gain,you you might have to tighten
(12:48):
your belt for a year or two uhand just get your hands dirty
and get in there and andsacrifice a bit of your salary
to build the business becausethat's what it's all about.
Dr James (12:57):
Boom, there we go.
Kevin (13:00):
And another point on that as well is um it's really
important, I think, when youtake a practice on to surround
yourself with professionaladvisors and pay for them.
Um I've always noticed thedentists that don't want to pay
for professional advice, they'llbe okay because they're
dentists and and you know,dentistry is a great business.
But 100% of the time, thepeople that pay for professional
(13:20):
advice end up taking that extrastep up and earning more money
because they're they're and wewere talking about this earlier,
outsourcing some of their workto other people and leaving them
to do what they do best.
Um yeah, so to my mind, it'smore important to think about
the challenges of ownership thanit is just the most recent
interest rates.
You you you know, we'll costout the financials in any
(13:43):
practice, and you have to lookat a few practices before you
find the right one.
And that that's the point youwere making a moment ago.
Don't just jump on a practice,but go and find the right one.
It's like buying a house.
You know, there'll be one therethat just fits.
Um, so uh so that's allimportant.
And then back to the funding, Imean that the the banks at the
moment are very keen to assist.
We've had you know, we'vetalked about all these different
(14:03):
products over various uhpodcasts recently, but there's
real appetite there from thebanks to help first-time buyers.
You know, we've got um we'vegot terms extended from 15 up to
20 years on goodwill purchases,we've got 100% finance for
people that may have bought aproperty and have you know
struggled to put aside extramoney to for the deposit on a
(14:25):
practice.
Um, we've even got productswith no valuation fees and no
legals, which uh which is justamazing, really.
None none of these productswere there a couple of years
ago.
So there is real assistance nowfor people buying their first
practice, and you know,especially to my mind, the bit
about terming the finance outover a longer period, um, which
helps keep your monthly paymentsdown.
(14:46):
Because I think the banks haverecognised that very few people
actually keep their loan for 15years, they're always going to
refinance because they'rerefurbing, they're buying a
second practice, they're orthey're selling or doing
whatever.
So um so yeah, the fact theycan actually extend to 20 years
and often go over the term ofthe lease as well, I think it's
a game changer.
(15:07):
So um so that's reallyimportant.
Um in terms of what people needto do to approach the banks,
again, things we've talked aboutbefore, but it's it's you know,
if you are gonna come in formoney, make sure you run your
personal finances well, don'thave unpaid fees on your bank
statements, um, look at your CV,and we're happy to look at that
(15:28):
over with you as well, and tryand get some sort of management
experience on there.
Um, and think about your yourbackground assets as well.
Uh the banks will accept if youhaven't got any background
assets but you've got a load ofcash that accepts that you've
you've done something with yourmoney.
If you've got no backgroundassets and no cash, you're
obviously going to be a morerisky bet for them because the
the first question is as adecent earned dentist, where's
(15:51):
all the money going?
Dr James (15:52):
Uh so uh what can what qualifies as a background asset
in their eyes?
Kevin (15:57):
Oh, good question.
Yeah, so I mean, obviously,property is the main one.
If you've bought your ownresidence, even if the mortgage
is quite high on it, you'veobviously put the deposit into a
property.
Uh, you may have ISAs,pensions, anything to show that
what you haven't got is a bigsalary and a load of debt, a
load of personal debt.
Um Right.
Dr James (16:17):
So they they actually yeah, okay, that's kind of what
I was curious about.
Like ISA's pensions, theyactually take this into
consideration, right?
And prop property I kind ofget, that's like very
traditional, isn't it?
But yeah, they'll even look atyour your paper assets as in
your stocks and bonds portfolioand your pension and your ISA.
Kevin (16:36):
Definitely, yeah.
And I said a lot of personaldebt, obviously a mortgage is is
personal debt, and the bankswill accept that you've actually
bought an asset with it.
What they don't want is peopleuh earning big salaries and not
buying assets.
They're they're buying okay, acar isn't really an asset, is
it?
It's a depreciating asset.
So if you're spending a lot ofmoney on cars and personal loans
and lifestyle, then it doesn'tbode well for somebody to be
(16:59):
able to take a bit of a salarycut and launch into owning a
business.
So um so that's really how theylook at things.
Dr James (17:07):
Good to know.
I thought you were gonna talknext.
I didn't want to interrupt, Ithought you were in full flow.
Okay, cool.
So you've given us a little bitof an idea as to I guess the uh
assessment process, right?
And um that's fine, good toknow.
(17:29):
And you might have said this isthat any different for someone
who's who's acquiring a practicefor the first time versus the
second time, or is it roughlythe same parameters?
Kevin (17:37):
So on the personal side, it's pretty much the same.
They're gonna look at the sameinformation.
On the business side, obviouslythere's a business to assess
that the applicant already owns.
So they'll be looking at theexisting business and what the
applicant's done with that sincepurchase.
So a very easy win or quick winwill be raising the fees up and
(17:58):
raising the profit up.
Uh, obviously that owes reallywell.
It means that the goodwillvalue of the practice is
increased, and you can leverageagainst that to buy a second
practice then as well.
Although, as I said earlier,there's also 100% finance
available on the target practiceas well.
Um the bigger question forexisting practice owners is how
(18:20):
they're going to split theirtime.
So we've got to be able to showhow um the applicant can
actually spend a reasonableamount of time in their existing
practice and be in the newpractice to grow it as well.
So of interest to a lenderwould be how a principal dentist
(18:48):
or an existing practice ownersplits their time.
Um the banks don't really likefunding for a second practice
that's going to beassociate-led.
Or not they don't like funding,but the loans of values are
likely to drop down quite a lotbecause it seems an investment
business.
So it's quite important for usto have the correct story about
how a principal can um can spenda few days in the new target
(19:11):
practice, but also not drop uhtheir income not to drop in
those in their existingpractice.
Um, because they'll obviouslyhave to pay an associate to
cover some of their time ifthey're working five days a
week.
So that's the calculation thatwe have to look at very
carefully for someone buying asecond practice.
Dr James (19:29):
Nice, which obviously is much less of a consideration
if it's associate led, right?
And they're they'll they'llfactor that in as well, right?
Kevin (19:39):
Yeah, yeah.
I mean it we we the bestapplication for the banks is
that somebody's gonna spendtheir time in both practices uh
rather than having one that'sassociate led.
Uh the minute it's associateled, as I said, it's viewed as
uh an investment business andthe loans of value is gonna be
lower.
Dr James (19:57):
I'm glad I asked.
There we go.
Kevin, we talked about 100%finance on one of the previous
podcasts, and that's interestingfor two reasons.
One because a lot of peopledon't know that it's possible,
as in you can borrow 100% of thegoodwill and the property,
right?
Kevin (20:16):
Yeah, property isn't nearly always 100% as long as
the financials demonstrateserviceability.
Um, but the goodwill is quiterecent, uh, and we've got two to
three banks now looking atthat, um, particularly for
first-time buyers.
Uh, and as we said before, youcan generally get 100% finance
as a second practice ownerbecause you use your existing
(20:38):
practice and leverage on that,use the goodwill value there.
Um so, what looks good to abank for a first-time buyer, as
we said earlier, it's somebodythat's got some background
assets, uh, either cash orproperty, etc.
Um, also who demonstrates thatthey are a food good fee grocer
(20:58):
and can step into the shoes ofthe principal and basically run
the practice.
Uh so those are the key points.
Um but but it's nice to see thebanks recognize that buying a
property involves putting a lotof cash in as a deposit.
So therefore, people oftenhadn't got the uh the level of
cash needed when they look fortheir first practice.
Dr James (21:21):
There you go.
And then that's interesting forthat reason.
And then also as well as that,well, we we kind of touched upon
this anyway.
Who is who is suitable for it?
But I guess you kind of justsaid that really, didn't you?
It's it's it it you know,anyone can get it in principle,
uh, even now first-time bars,right?
Kevin (21:38):
Yeah, so it's it's about the CV a little bit there as
well.
Someone who's got a few years'experience under their belt,
built up of um built up some uhsome kind of background assets
um and buying their firstpractice, yeah.
Dr James (21:51):
I guess the other obvious question to ask is is
the interest rate?
I know an interest rate is notobviously going to be the only
factor that determines yourrepayments, but are the interest
rates higher?
Or are the no better questionare the repr are the repayment
terms less favorable on 100%finance?
Because that includes theduration and also the interest
rate.
Kevin (22:11):
Does and actually the interest rate is often far more
affected by the term of theloan.
So the interest rate may behigher on a 20-year loan to a
15-year loan.
However, the monthly paymentson a 20-year loan are going to
be cheaper, which is probablythe more important factor for
anyone buying.
So everything has an effect oninterest rate because the banks
(22:33):
have um interest ratecalculators and they throw all
the information in.
So um yeah, 100% would affectthe interest rate, but but not
so much.
You know, it'd be you know afraction of a percent.
So um, yeah, not to my mind,not worth worrying about.
And getting 100% is fantasticbecause the bank's buying the
asset for you.
Dr James (22:52):
And that's that's exactly what I was after when I
asked that question.
Like obviously it's it's alwaysgonna be a little bit lick your
finger, put it in the air.
But even you saying it's not somuch is reassurance, right?
Because I would have justassumed that it's a lot more, or
they somehow charge you a lotmore, but you're not saying that
that's the case necessarily forthe science of it.
Kevin (23:12):
Not particularly, no.
Um, so as I said earlier, theum the term look alone does
affect it, and the rate tends tobe slightly higher for a
20-year term on goodwillcompared to a 15 year term.
But I always tell clients it'sabout your monthly payments.
If you pay a slightly higherinterest rate on a 20 year term,
but your payments are a lotcheaper, that's got to be worth
going for, hasn't it?
(23:32):
You can always make lump sumrepayments to the loan each year
if you've got surplus cash topay it off quicker.
So if anyone's interested incontacting us to talk about
finance.
Uh you can reach me at kevin atsaroma.co.uk or mobile number
0780 144 0622.
(23:53):
So
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