MARK NAUGHTON of Bank of Ireland Business Banking offers advice on drafting a business plan for a dental practice, and how to put together a loan application.

As a profession, dentists have a high rate of business ownership. However, with little or no business training included in dental education, many find the process of setting up and running a business, particularly obtaining finance, daunting.

The cost involved in setting up a dental practice can vary depending on whether a practice is being acquired or established. Typical costs will include specialist dental equipment, property fit-out costs, professional fees and, in certain cases, goodwill or other considerations.

Funding will generally come from a combination of sources such as equity from the dentist and bank finance. A lender will normally expect the dentist to provide cash equity in the region of 25%; however, this may vary depending on the type of assets being acquired, repayment ability and the term requested.

This article aims to provide some guidance on drafting a business plan, and on the lending application process.

The business plan
It is imperative that a robust business plan is prepared prior to approaching a bank for finance. A business plan is an essential tool in helping you to assess the viability of your proposal. It can also be developed to assist with the planning and subsequent performance management of the business.

A business plan that is specific to a dental practice should contain the following essential elements:

General background and profile of dentist and key personnel:

  • Type of practice – general dental practitioner (sole or partnership), or specialist practice that may include an orthodontist, oral surgeon or other specialist.
  • Description of the proposed services offered, i.e., routine preventive procedures, restorative work, root canal, advanced restorative work and/or specialist treatment.
  • The medium- to long-term strategy of the practice.
  • The qualifications of the dentist(s) and their relevant experience (associate, sole practitioner, etc.).
  • Details of key practice personnel – receptionist, dental nurses, dental hygienist, etc. How many staff will be employed by the practice?
  • Details of financial and legal advisers.

Location and market analysis:

  • Significant market research should be carried out prior to deciding on a location. The dentist should be fully aware of local demographics and competition. Knowledge of the area will help with cash flow forecasting, as the practitioner will be cognisant of the mix of patients and likely fee-paying status, i.e., private/DTSS/DTBS.
  • Is the practice located in an urban or rural catchment area? Why does the area appeal from a business perspective?
  • Analysis of competitors and potential referral sources.
  • Does the practice have a unique selling point; what differentiates the practice from local competitors?
  • SWOT (strengths/weaknesses/opportunity/threats) type analysis may be helpful.
  • Key risks and mitigants.
  • Details of marketing plan and key sources of referrals.

Overview of the practice:

  • Size of practice (m²) and car parking (on street/private).
  • Is the practice freehold or leasehold? Provide breakdown of costs and lease details (if applicable). Please note, a financial institution is unlikely to extend a loan term past the lease expiry date.
  • Number of rooms (reception, consulting rooms, etc.). Are all rooms going to be utilised by the dentist or will some be rented to a third party?
  • General overview of fit-out requirements.
  • What type of patient management system will be put in place?
  • Details of cash management system for taking payments and claiming DTSS/DTBS receipts.

JIDA_June-July2013_JIDAFunding request and table:

  • Description of the purpose of the loan(s) and duration required.
  • A list of all sources and uses in a funding table (Table 1).
  • For development/fit-out include pertinent information such as: (i) planning permission; (ii) cost breakdown (fixed price contract or otherwise); (iii) contingencies; (iv) details of contractor (if agreed); and, (v) estimated time to completion.
  • Breakdown of specialist equipment requirements (dentist chair, drills, x-ray equipment, etc.) and costs (incl. VAT).
  • Is the dentist’s equity contribution saved, gifted or borrowed?
  • In a practice acquisition, a bank will require the methodology used in the purchase/goodwill calculation or enterprise value of the business, i.e., multiple of sustainable earnings or turnover based approach.

The appendices to a business plan will normally include key financial data drafted by a financial accountant. The level of financial information required will vary depending on whether a practice is being acquired or if it is being established.


  • While it is difficult to accurately predict the future cash flows of a business, a lender will expect the dentist to forecast key financial performance for the next three years.
  • Financial projections should include profit and loss, balance sheet and cash flow statements. Assumptions underpinning projections should be clearly outlined and broken down into sub-headings such as sales mix (private/DTSS/DTBS, etc.), labour cost, establishment expenses, etc.
  • A lender will normally carry out a sensitivity analysis on the detail supplied and may benchmark performance against industry data. In addition, it is likely that financial and non-financial covenants will be based off the financial projections provided (Table 2).JIDA_June-July2013_JIDA

Additional financial information will be needed for practice acquisition proposals or indeed where the dentist has an existing practice, including:

  • Three years’ certified financial accounts, to include trading profit and loss and balance sheet.
  • Up-to-date management accounts.

Funding applications
A typical business plan/funding application should also include:

  • Statement of affairs for the dentist (details of personal assets and liabilities).
  • Confirmation that tax affairs are in order. Typically, a bank will seek either a tax clearance certificate or letter from the dentist’s accountant confirming that all taxes are paid and up to date.

Please note: it is important that the dentist’s personal financial affairs are satisfactory in order to ensure that no additional risk is posed to the business and the bank.It also important that the dentist involves appropriate professional advisers at an early stage to assist with the business plan. The following websites maybe helpful:

The bank’s primary focus when analysing the business plan is to establish the viability of the proposal and, following from that, the repayment capacity of the business, i.e., the level of cash available to meet debt repayments after adjusting for cash and non-cash items such as tax, capital expenditure, working capital and drawings.

JIDA_June-July2013_JIDAA lender will also consider various qualitative factors such as industry characteristics, the experience and track record of the dentist, and the proposed security value (if any) when quantifying the level of risk attaching to a proposal.

A business plan should not be overly complex but it needs to be fit for purpose and tailored to the specific request. We encourage dental undergraduates or existing practitioners who are thinking of setting up a practice to contact Bank of Ireland to discuss the proposal at an early stage and prior to the preparation of a business plan.

Please note, the above advice is intended as an indicative guide and is illustrative of the type of information Bank of Ireland would expect to see in a business plan for a typical dental practice. Other financial institutions may differ in this regard.

Business supports from Bank of Ireland
During Q1 2013 Bank of Ireland held over 50 free credit clinics in branches and business incubation units around the country. The clinics provide new and early stage businesses with a good insight into the lending process and how a bank assesses repayment capacity as well as a review of financial information and cash flow forecasting. Details of a further 60+ forthcoming clinics and locations are on Clinics are free and available to new and existing customers