Securing Bank Funding for your Dental Practice Purchase: A Complete Guide

aafra9
Jun 13
5 min read

Updated: Jun 18

Securing Bank Funding for Your Dental Practice Purchase: A Complete Guide — **PKPI**

Introduction

Establishing or acquiring a dental practice is a significant milestone in any dental professional’s career. It marks the transition from working as an associate to becoming a business owner, giving you full control over your clinical approach, patient care, and financial future.

For many dentists, bank funding plays an important role in turning this goal into reality. However, the process of applying for a loan can be complex and, at times, overwhelming, especially if it is your first time seeking business finance.

There is a lot to consider, from preparing a strong business plan and accurate financial forecasts to understanding interest rates, repayment options, and what the lender expects. Banks and lenders want to see more than just your clinical skills. They also want to know that you can manage and grow a successful business.

That is why having the right guidance is so important. With expert support, you can structure your funding in the most effective way, improve your chances of approval, and confidently set your dental practice on the path to long-term success

At PKPI we support dentists through every stage of practice acquisition, from financial projections to securing bank finance and post-purchase planning. In this blog, we break down everything you need to know about getting a bank loan for your dental practice purchase including preparation tips, loan types, and hidden costs.

A Step-by-Step Guide for Dental Practice Purchase

Key Preparation Steps

Target Practice Identification Banks will only assess your borrowing potential against a specific practice. There’s no such thing as a universal Agreement in Principle (AIP) for dental practice loans. This is because profitability varies case by case, and lenders need actual data to assess risk.

Financial Health Check

Like a mortgage, lenders want to see that you’re financially stable and live within your means. Avoid major personal spending like car leases or home extensions before

a pplying it sends the wrong message.

Save a Cash Deposit

Most banks require a 10%–20% deposit for a practice purchase.

NHS or plan-based practices: 90% borrowing possible

Private fee-per-item practices: May need 20–30% cash down

100% finance is rare and often requires property security or significant equity elsewhere

3. Personal Projections

Work with a dental-specific accountant to adjust the target practice’s P&L to match how you will run it.

At PKPI, we prepare hundreds of these projections each year giving buyers realistic figures for their take-home pay after loan repayments and taxes.

4. CV Updates

Highlight:

Your clinical experience
Business and management background

This helps them judge your ability to transition from associate to practice owner.

What Do Banks Want to See?

Repayment Viability: Practice profits must cover:
Your current living expenses.
Loan repayments (ideally, profits > current earnings.
Financial Discipline: Banks scrutinize spending habits, debt, and savings (e.g., maxed-out credit cards to raise red flags).
Track Record: If you project £500k fees but historically earned £200k, evidence (e.g., growth plans) is essential.

They want to see consistent, responsible financial behaviour — ideally, saving rather than spending.

Loan Types Compared

Type	Term	Key Features	Best For
Full-Term Loan	15–25 years	Fixed repayments; no refinancing needed	Stability seekers
PAL	3–5 years	Lower initial rates; balloon payment/refinancing due later	Short-term cost savings
Variable Rate	2–5+ years	BOE base rate + bank margin (e.g., 2.5% + 3.5% BOE = 6%)	Risk-tolerant borrowers
Fixed Rate	2–5 years	Locked repayments; gap vs. variable rates narrowing (as low as 0.01% difference)	Budget certainty amid rising rates

The Loan Application Process: Step-by-Step

Engage a Broker (Week 1):
They negotiate with 6+ lenders and clarify complex terms (e.g., PALs).

You don’t have time to chase 6+ lenders. At pkpi.uk, we’ll gather your information and submit a lending proposal to all major healthcare banks on your behalf.

Get Loan Offers

Once banks review your proposal, they’ll send offers. We’ll help you compare terms, interest rates, and flexibility before making your decision.

Receive Agreement in Principle (AIP)

This document confirms the amount of your borrowing and can be shown to the seller as proof of your borrowing. Valid for 6 months (extensions are possible).

To Submit Credit Application

You’ll need:

6 months of personal bank statements
Tax returns
Business plan

The lender’s credit team reviews everything. Expect a 2–4-week turnaround.

Satisfy Pre-Conditions

Each bank has its checklist, which may include:

Practice and property valuations
Updated accounts
Signed lease aligned with loan term
Confirmation of taxes paid
Evidence of life insurance
CQC and NHS contract readiness (if applicable)

Exchange & Completion (Week 12+):

Once all pre-conditions are met, the bank issues a “safe to lend” document to your solicitor. Funds are released just before completion day.

Associated Costs

Fee Type	Cost	Notes
Arrangement Fee	1–1.5% of loan	Usually added to loan (no upfront cash)
Bank Valuation	£1,700–£2,250 + VAT	Paid upfront in cash
Legal Fees (Bank)	~£3,500 + VAT	If bank uses its own solicitor
Recommended Insurance
Critical Illness Cover	Lump-sum payout	Covers serious illness/disability
Practice Overheads	Covers staff/rent/utilities	If you’re unable to work temporarily

FAQs

Can I get 100% financing without a deposit?

A. Rarely. Banks usually require 10–30% cash or property security (e.g., a second charge on your home).
How long does a loan approval take?

A. Allow 3–6 months from AIP to completion. Delays commonly occur during valuations and legal checks.
Should I choose fixed or variable rates?

A. Fixed rates offer payment certainty (ideal amid rising BOE rates). Variable rates may start lower but carry volatility risks.
Is PAL financing risky?

A. PALs have lower initial rates but require refinancing every 3–5 years—potentially incurring repeat arrangement fees.
Why do private practices need larger deposits?

A. Banks view fee-per-item models as higher risk. Recent policy shifts often mandate 20–30% of deposits.

Getting a loan to buy a dental practice requires good planning, financial estimates, and the right support. Partner with a dental-specialist broker so you can meet the bank’s needs and focus on caring for your future patients.

Whether you’re buying your first practice or expanding your group, dental finance is complex but manageable with the right support. Connect with PKPI for smooth Dental Loan Process

At PKPI we offer: