What Lenders really want to see in a dental purchase proposal

When assessing a dental practice purchase, lenders are not just looking at the headline price. Their decision is driven by affordability, sustainability, scope for growth and ultimately how well the Practice is set up for long-term success.

Understanding what lenders really care about allows buyers to sense-check opportunities early and avoid wasting time on proposals that are unlikely to be funded.

Cash is king

At the heart of every lending decision is cash flow. Lenders want confidence that the practice can comfortably service borrowing while still supporting reinvestment and personal income.

They will closely assess:

• EBITDA and how it has been calculated

• Associate and staffing costs

• Consistency of income streams

• Fixed and Variable costs

• Buyers’ drawings requirements

Affordability and debt servicing

Lenders apply stress tests to ensure repayments remain affordable even if conditions change. This includes reviewing:

• Debt service coverage ratios

• Personal drawings and lifestyle costs

• Existing personal and business liabilities

A proposal may initially look attractive on paper but fail lender affordability tests once these factors are applied.

NHS, private, and mixed considerations

The income mix of a practice influences lender appetite and structure. While NHS income offers stability, lenders will also examine:

• Contract sustainability

• UDA delivery history

• Private income growth trends

• Reliance on cosmetic or discretionary treatments

Understanding how lenders view different income streams helps buyers align expectations early.

Structure matters as much as price

Loan term, short term commitments, repayment profile, security structure and ongoing covenants all affect affordability. A well-structured facility can:

• Reduce monthly pressure

• Improve cash flow flexibility

• Support future growth or exit plans

This is why the cheapest rate may not always the best outcome.

Common deal red flags

Some issues consistently slow approvals or change terms late in the process:

• Overstated profits or one-off income

• Under-market associate costs

• Short lease lengths or restrictive clauses

• Unclear succession or exit plans for the current owner

Identifying these early allows buyers to renegotiate or walk away before time and costs escalate.

Thinking like a lender

The most successful buyers learn to view deals through a lender lens. This leads to better decisions, stronger offers, and smoother completions.

Understanding the numbers that matter is not about becoming a finance expert. It is about knowing enough to buy with confidence and clarity.