How lenders want you to manage and develop a start up

dental design team

For a lender to approve an application for finance for the build work /equipment or purchase of premises for a squat they require not only background on you and the plans for your business, but they have certain internal guidelines that they want you to adhere to when formulating your plans.

During these difficult times many lenders have withdrawn from this market as they see the start up proposition as to risky – no doubt they will return to the market in the next few months in the meantime other avenues of finance have to be utilised.

Sourcing a site has become a little easier recently with the changes to the planning designations which has removed in many cases the need to obtain a change of use for the property and saved a lot of time for you.

They will be looking for you to only set up one surgery fully at the outset as generally for most squat practices the number of clients will be minimal initially and this will grow over time. The logic of this is clear in that there is little point in setting up 2-3 surgeries with all the equipment as the expenses of this are wasted when they are not used.

They will be happy however to allow you to divide the property during the refurbishment and install the correct fire doors, flooring, water, and electricity supply to the additional surgeries. This means that as the practice grows it is possible to expand by fitting out an additional surgery quickly.

They will want you to obtain 2-3 build quotes and would prefer that you use a dental builder who has a good history of work in the dental sector and may well be known to the lender. They will want the build to be sensible keeping costs as low as you can without compromising the quality and finish that is required.

You need to look carefully to ensure that all fire requirements / ventilation levels are met new requirements to deal with Covid-19 should be reviewed carefully with regard to air filtering to reduce times and ensure that all the various standards set by CQC are achieved. Look carefully at costs of such things as reception desks, decoration and ensure it is of a good standard within your budget.

The same applies to equipment costs and you should shop around for the best price for the equipment you need. If it can be deferred to a later date do so to ensure that you keep your fixed costs at the outset as low as possible.

The projections that lenders require in a well laid out format showing both profit and loss and cashflow for a three-year period will identify for you and them the way the business will move forward. With limited income and plenty of fixed costs on the day of opening losses will probably be incurred in the first few months until income grows to a level sufficient to break even and then make profit. This turnround to profit usually happens around the 6-8 month of the practice opening.

So how can you reassure the lender this will be a success: –

  • Try and negotiate a rent-free period if leasing to enable you to complete the work and open.
  • Seek an interest only period from the lender if possible.
  • Keep staff costs down at the outset employ a nurse / receptionist only.
  • Maintain an associate role elsewhere – you may only be at the new practice 1-2 days in the first few months – working elsewhere for the rest of the week will bring in income to cover household expenses if necessary and provide funds to inject into the business to cover initial losses.
  • Have spare funds available to cover any losses, these can be put into the business at the outset.
  • Robust plans for marketing / branding your business and start marketing once the build starts.
  • Plan to use professionals – Dental builders / solicitors / accountants / brokers.
  • If bringing clients / income into the business at the outset – set out who they are and why they are coming – check your associate contract to ensure no conflicts of interest.
  • If more than one dentist is involved, then this assists income / work share.

Utilise the skills and knowledge of others to assist you in this venture, they have seen the challenges before, and they have dealt with them and know what the lenders want from you and the plans.

Work with people /firms who have experience of start-ups / attend course to understand the challenges you face.

If you ensure that you control costs and carry out the proper investigation of competition / location / use professionals with experience of the sector and you obtain accurate and realistic projections, you will provide yourself with the best chance of obtaining finance and of being successful.


Article by Samera Finance, partner.