Stick or twist? The key to securing competitive funding

David Ward explains why it is worth checking the various options when unlocking finance to add another practice to your portfolio

I wonder if this scenario sounds familiar to you: your bank has supported you in growing your portfolio and you are looking to expand with the acquisition of another practice or multiple practices. You carry out due diligence and calculations, quickly establishing the practice (or practices) you have found are a perfect fit within your existing group. Thereafter, you liaise with your bank manager, who is keen to assist and begin the credit process.

Several weeks pass and your incumbent lender finally has an answer for you. They would love to assist in supporting your business growth, particularly with the dental market being described as a ‘green light’ sector. However, they express concerns that you are expanding too quickly or an increased number of practices is beyond their lending parameters.

Alternatively, they are comfortable in supporting you, although, as part of the deal, you will have to refinance your existing debt away from your previously low rate to an eye-watering higher rate after recognising an opportunity to implement this.

These scenarios are all too familiar in today’s
lending market.

Should you stay or should you go?

Do you stick with your current lender or twist and move on? Do you remain with your incumbent bank because you are reliant on its expertise? Do you stay as a way of showing loyalty – after all, it has supported you from when you very first started your business? Or do you carefully evaluate your options to ensure you are not missing an opportunity in the wider market?

A suitable solution is to review your options and assess the lending market to understand what is available.

The financial landscape has diversified over recent years, with traditional high street lenders no longer dominating the market, paving the way for new and alternative lenders.

This poses the question – where do I look to secure a competitive deal? You may know several lenders, but do you know them all and is there an individual that would be the best to speak to? Do they have a high success rate with their credit team? It is imperative you work with a lender and manager that will deliver a funding package best suited to you.

A specialist dental finance broker can take a whole market approach in securing funding. An experienced broker will have established strong rapport with the top managers of each lender in the market. These managers can drive a deal over the line, which may fall outside the standard lending policies, and deliver on competitive pricing and terms.

A competent broker will review your current funding situation and guide you through the various routes available, such as keeping the existing debt and practices with the original lender or refinancing this debt alongside borrowing for your new purchase.

Reviewing your options

You may not be able to remain on your existing low rate, however, when calculating the cost of the lost opportunity, you may quickly establish it is not such a loss after all. This will then allow you to expand on your terms, usually at less expense than if you stayed and refinanced with your existing lender.

For example, Christie Finance worked with a small group looking to expand whose existing lender was concerned about the perceived increased risk with an additional practice on the books. It was happy to lend to the client, but at a significantly lower loan-to-value and a higher margin to reflect the increased risk.

Christie Finance was able to secure the desired amount of funding required at a lower rate than the incumbent bank proposed. The new lender indicated it had the appetite to lend on further acquisitions, allowing our clients to continue to strive towards their long-term ambitions.

We have witnessed several business owners being restrained by the shift in policies from their incumbent lender. Successful operators are as proactive in their search for suitable funding as they are in their pursuit for their next acquisition. It is important to challenge the status quo and seek a second opinion when looking towards the future of your business.


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