Whether you have recently purchased a dental practice, or are shopping around for a better deal, choosing the right financial provider to fulfil your requirements can play a vital part in your business’s success. With almost 20 years’ experience in the finance industry, existing practice owners and prospective buyers typically ask me the following questions when determining who they should bank with, so I thought it would be useful to share with you my responses in my latest blog.
What is happening in the banking market right now? Are there lots of offers and deals out there for business banking? How can I tell if these are good value, or too good to be true?
“The banking market is very competitive. Dental practice owners can choose from a pool of established high-street lenders and a growing number of alternative funding sources from specialist finance providers, so it’s worth exploring all potential options to make an informed decision.
“If something sounds too good to be true then, it usually is. On occasion, business owners will choose what appears to be an unbeatable offer from a financial lender only to discover that the terms have changed substantially when they drawdown. While focusing on the interest rate of the loan is important, it’s just one aspect of the entire transaction. When negotiating, it’s important to keep in mind other important factors such as what the terms of the loan are, how soon you need to repay the money and what you can use the loan for. Also some high street lenders will make their loans dependant on you moving your business banking so be sure to check the small print carefully.”
Should I go with an established player, or try a ‘challenger bank’?
“The dental sector is currently experiencing lots of change with NHS, private and mixed practices having fluctuating goodwill values. In times of economic uncertainty some high-street lenders may adopt a more risk-averse approach towards supporting business owners. ‘Challenger banks’ and specialist alternative finance providers can offer a range of flexible financial solutions which may be better suited to your needs. These include long-term business acquisition loans with interest-only payments and commercial mortgages with high loan-to-value options. When shopping around look beyond product to reputation and indicators of customer satisfaction, such as Net Promoter Score.”
What do dental practice owners need to take into consideration when choosing who to bank with? What should I look out for? And what should I avoid?
“Regardless of whether you choose to bank with an established high-street lender or an alternative finance provider, the most important aspect is that you choose someone that understands your sector and what your business goals are. It’s all very well going with a lender that can make bold promises to you at the outset, but unless they have experience and intrinsic knowledge of the dental industry then they are unlikely to be the right fit. It’s vital to ascertain how long they have been operating in the dental sector and whether they come recommended by specialist sales agents or through your business contacts.
“Personal relationships really count. Large business decisions come with all sorts of financial obligations and you will want to be sure you can get on with your Account Management team and that they are available to you when you need them, not just 9-5.”
What about refinancing? What factors should I consider when trying to negotiate a better deal?
“Refinancing can be expensive and result in quite a lot of upheaval. The main reasons to consider refinancing are if your loan is on a high, uncompetitive rate and you are looking to get a better deal, particularly if you are considering buying another dental practice. Or if you plan to make some significant changes to your existing business model and require funding for premises refurbishment, or maybe major investment in new technology and equipment.”
Should I be prepared to stay with my bank for a long time, or does it pay to switch from time to time to get better deals?
“Always enter into any banking relationship with the view that you’re going to stay with your financial provider for the term of the loan and build a mutually beneficial, long-term partnership. However, should your requirements and needs change, consider alternative options from different lenders. Not all financial providers were created equal, so it pays to keep abreast of the market and consider alternative funding options.
“It’s also worth noting sometimes you won’t have a choice – banks will have a level of lending that they feel comfortable with, once they have reached their exposure limit they may be unwilling to provide further lending which will mean you will have to look elsewhere regardless of how satisfied you are.”
How can I build a good relationship with my business banking account manager?
“When buying a dental practice you could be about to embark on a 15 year relationship with your business banking relationship manager so it’s essential that you actually like them and there is mutual respect and trust on both sides. It’s essential that you feel comfortable in being able to discuss your career aspirations with the knowledge that you can rely on their specialist advice and knowledge of the dental sector. You are also more likely to build a good rapport if they can offer you a single point of contact and be on hand to respond to your telephone calls and emails in a timely manner, making every effort to always put you first.”