Dentists were not only seen as uber-safe but also as a gateway to ‘up-selling’ other bank services – asset finance, life assurance, general insurance, wealth management, personal mortgages. So the commercial loan was often seen as a loss-leader – a method to unlock many other potential profitable cross sales.
With the levels of debt relatively low and with business revenue backed predominantly by the NHS, the lending was seen as virtually zero risk.
Then...the world ended; well financially speaking. We had what many observers commented as the biggest financial crisis of all time____’ . With the blank very much dependent upon which newspaper was penning the article. It was either ‘since The Great Depression’ or ‘In History’ or indeed the pragmatic ‘since the last one’. Take your pick.
Banks pretty much shut up shop, despite the mantra that we brokers began very quickly to loathe and despise ‘We are very much open for business’, which meant that if you didn’t want to borrow very much money and didn’t mind paying for it...then they would, potentially, think about it.
Markets recovered and banks started to raise their heads above the parapet again...very slowly. We all looked around and saw that the world hadn’t actually ended, but that the landscape had certainly changed. In the blink of an eye, HBoS had disappeared, ‘saved’ by the reluctant knights in shining armour – Lloyds. Northern Rock had also disappeared – although in a slightly less savoury way than its rivals had when they were ‘carpet-bagged’.
The traditional High Street lenders emerged battled-scarred and cautious, trying to be competitive whilst protecting their fragile balance sheets. Tough times for SMEs.
One man’s problem is another man’s opportunity. Whilst the High Street bankers were navel-gazing and trying to deflect any blame for the crisis away from them, others saw obvious gaps in the market. We started to see new banking licences being applied for. Cambridge & Counties and Atom Bank just a couple of the ‘Challenger Banks’ whose names have been creeping into the market to, well, challenge the establishment.
So we are back to normal then?
Well not quite. There is certainly more choice in the market – and competition is very welcome. However, and I must say, thankfully, lenders have not returned to the pre-crash bear-pit. ‘Responsible lending’ has re-emerged and lenders have refocused on the ability of an individual business to be able to service its debt as opposed to what cross-sales opportunities may appear.
This has opened up the market. With loan-to-values ranging from 60%-80% on the goodwill and 75-100% on the freehold and interest rates ranging, in general, from 2.5% to 6%, with the actual terms varying considerably from lender to lender. Although these may not be as attractive as the pre-crash offers, these lending levels and terms are sustainable whilst still being commercially attractive.
So I can just shop around then?
Well you can...but which lenders do you approach? At Christie Finance, we approached 50 different lenders in 2016, ensuring that we get the right loan package for each individual case. If a dentist goes directly to their own bank, they might be lucky. We don’t like those odds.
However, you only get one opportunity with each lender. If the banker that deals with you (their choice, not yours) doesn’t understand the sector properly, doesn’t have the ear of credit, doesn’t have the desire to challenge an underwriter and doesn’t have the ability to sharpen his or her pencil when it comes to agreeing terms then, at best, you’re not getting the best deal in the market. At worst, you have now been declined with no option to appeal – unless the whole deal materially changes. How do you know how good your manager is?
At Christie Finance, we have spent 40 years dealing with all lenders. We know the lenders who are more amenable and we know that it’s not just about getting the right lender, it’s as important to get the right manager. It could be the difference between getting your dream practice...and having to take a step back and watch someone else buy it from under your nose.
As the banks will always declare ‘What is the price of risk?
David Ward – Director at Christie Finance
A qualified banker with many years’ experience arranging commercial finance, including 15 years at Christie Finance, David specialises in sourcing funding for dental practices and pharmacies. Advising and supporting clients who wish to acquire a single asset, expand their portfolio or refinance, he specialises in delivering funding for both NHS and private medical businesses across the UK.
To discuss the opportunities out there for funding call David on 0121 452 3717