By Poonam Madani, Associate Director, RA Accountants

Securing funding to buy a dental practice is an important milestone. But the purchase price is only one part of the financial commitment.

For dentists considering an acquisition, particularly transactions exceeding £2 million, understanding the total cost of buying and operating the practice is essential. Even where a lender offers 100% acquisition finance, buyers may still need significant funds for professional fees, working capital and investment following completion.

Does 100% dental practice finance cover everything?

A 100% funding offer can be attractive, particularly for dentists looking to acquire their first practice or expand an existing portfolio.

However, the term generally relates to the agreed funding structure and does not necessarily mean every acquisition-related expense is covered.

Before accepting an offer, buyers should establish exactly what the lender will finance, which costs must be paid separately and whether additional security or personal guarantees are required.

Equally important is whether the acquired practice can generate sufficient cash to service the borrowing while meeting its ongoing commitments.

What additional costs should dental practice buyers consider?

Beyond the agreed purchase price, several expenses can affect the overall acquisition budget.

Legal and professional fees

Dental acquisitions require specialist legal advice, including reviewing contracts, property arrangements, employment matters and, where applicable, NHS contractual obligations.

Lenders may also require independent legal representation, with those costs potentially payable by the buyer. Requirements and fees vary between lenders and transactions, so it is worth establishing these early and understanding whether any flexibility exists.

Financial and commercial due diligence

Reviewing historic accounts alone is insufficient. Buyers should examine the quality of earnings, NHS and private revenue, associate arrangements, payroll, laboratory costs, outstanding liabilities and the sustainability of reported profits.

Funding and transaction costs

Depending on the agreement, arrangement fees, valuations, security documentation and other lender charges may apply.

Property and tax considerations

Where an acquisition includes freehold property or a lease, additional property-related costs and potentially Stamp Duty Land Tax may arise. The treatment depends on the transaction structure and location.

Working capital and post-acquisition investment

Payroll, supplier payments, equipment replacement, recruitment, marketing and unexpected expenditure can all create demands on cash immediately after completion.

A £2 million acquisition: the cash-flow question

Consider a hypothetical dental practice purchased for £2 million, with the entire purchase price financed.

At an illustrative interest rate of 6% over 15 years, monthly capital and interest repayments would be approximately £16,900, or £203,000 annually.

This is before accounting for transaction fees, tax, owner drawings or additional investment.

The critical question is whether the practice can consistently generate enough cash to meet those commitments.

Buyers should model different scenarios, including changes in associate availability, rising operating costs, lower-than-expected revenue and higher interest rates.

A profitable practice on paper does not automatically translate into sufficient cash flow to support acquisition debt.

Buyers should avoid focusing only on a headline EBITDA multiple. The key question is how much cash remains after tax, debt repayments, necessary capital expenditure, working capital requirements and an appropriate level of remuneration for the purchaser.

Why financial planning should begin before the offer

Acquisition decisions should be based on more than an asking price, headline valuation or available borrowing.

A comprehensive financial assessment should establish:

• The practice’s sustainable profitability and cash generation.
• The total acquisition costs and initial working capital requirement.
• Expected debt repayments and sensitivity to interest-rate changes.
• The impact of NHS and private income, staffing and operating costs.
• Whether the acquisition supports the owner’s longer-term commercial objectives.

For established practice owners considering a second or third acquisition, the analysis should also consider the effect on the wider group.

Looking beyond completion

Completing the acquisition is only the beginning. New owners should expect to remain closely involved in the practice for at least the first six months after completion rather than assuming the business can immediately operate on autopilot.

This transition period allows the owner to understand the team, patients, systems and cash-flow cycle, build relationships with the clinical and administrative team and confirm whether the assumptions made during due diligence are being achieved in practice.

During the first six months, owners should regularly monitor:

Monthly revenue, maintainable EBITDA and cash flow against the acquisition forecast.

NHS and private income, including UDAs where applicable, patient volumes and treatment mix.

Associate and clinician performance, availability and retention.

Payroll, laboratory costs, supplier expenditure and working capital.

Debt repayments, tax liabilities and planned capital expenditure.

Operational issues inherited from the previous owner and progress in resolving them.

Only once the practice has demonstrated consistent performance, appropriate controls and a dependable management structure should the owner consider moving towards a more hands-off model. The aim should not be to buy a practice and immediately put it on autopilot, but to build a practice that can eventually operate successfully without constant owner intervention.

At RA Accountants, we support dental practice owners with acquisition planning, financial due diligence, cash-flow forecasting, funding assessments and ongoing financial management.

Understanding the true cost of acquisition allows buyers to assess opportunities with greater confidence and plan for sustainable ownership.

Considering buying or expanding a dental practice?

Whether you are acquiring your first practice or expanding an existing dental group, understanding the full financial implications before committing is essential.

Our specialist dental accounting and advisory team can help you assess acquisition affordability, evaluate financial performance and plan for the next stage of ownership.

Explore RA Accountants’ dental accounting and advisory services

Frequently Asked Questions About Buying a Dental Practice

Can I get 100% finance to buy a dental practice?

Yes, some specialist healthcare lenders may offer up to 100% finance for a dental practice acquisition, subject to their lending criteria. Approval will typically depend on the practice’s financial performance, the buyer’s experience, affordability, available security and the proposed transaction structure.

However, 100% acquisition finance does not necessarily cover legal fees, professional costs, working capital or investment required after completion.

Does the bank require its own solicitor when financing a dental practice acquisition?

Some lenders require separate legal representation to protect their interests, particularly for larger or more complex acquisitions. Others may permit a solicitor to act for both the buyer and lender, subject to their requirements and any potential conflicts of interest.

Where separate representation is required, the buyer may be responsible for the lender’s legal fees in addition to their own. These costs can be substantial, so it is important to request an estimate early and establish whether the arrangement or fees are negotiable.

There is no universal £2 million threshold that automatically requires separate lender representation.

What additional costs should I budget for when buying a dental practice?

Alongside the purchase price, buyers should consider legal fees, financial due diligence, lender arrangement fees, valuations, property-related costs, potential taxes and regulatory requirements.

Additional funding may also be needed for payroll, equipment, recruitment, technology and working capital following completion.

A detailed acquisition budget should distinguish between one-off transaction costs, ongoing operating expenses and planned investment.

How much working capital do I need after buying a dental practice?

There is no fixed amount suitable for every dental practice. Working capital requirements depend on the practice’s operating costs, NHS and private income arrangements, payroll commitments, supplier payment terms and anticipated expenditure.

Buyers should prepare a cash-flow forecast covering at least the first 12 months following acquisition, including sensitivity testing for unexpected costs or lower-than-forecast income.

The objective is to ensure the practice can meet its financial obligations without relying on optimistic revenue assumptions.

How do I know whether a dental practice can afford its loan repayments?

Affordability should be assessed using sustainable cash flow rather than turnover or reported accounting profit alone.

A financial assessment should consider maintainable earnings, operating expenses, tax liabilities, capital expenditure, owner drawings and proposed debt repayments.

Buyers should also model scenarios involving higher interest rates, reduced revenue or increased staffing costs.

A practice may appear profitable but still experience cash-flow pressure if borrowing commitments are too high.

Disclaimer: This article is provided for general information only and does not constitute financial, tax, legal or lending advice. Funding availability, transaction costs, tax treatment and regulatory requirements depend on individual circumstances. The repayment illustration is hypothetical and excludes fees and other charges. Professional advice should be obtained before proceeding with an acquisition.