Dentists Who Invest Podcast

Smart Ways To Reduce Your Finance Repayments with Kevin Saunders [CPD Available]

• Dr. James Martin • Season 4 • Episode 414

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Cash flow feeling tight while your practice ambitions keep growing? We dive into the real mechanics of refinancing for dentists and show how the right structure can lower monthly payments, unlock equity, and create the headroom to expand with confidence. Rather than chasing a headline rate, we focus on the three levers that truly move the needle: loan amount, interest rate, and term—and how blended and partially amortising loans can beat a small rate cut when it comes to monthly affordability.

Kevin breaks down why refinancing is broader than most owners realise, from releasing capital to buy equipment or a second site, to restructuring short-term debts that strain cash flow. We explore blended loans that combine property and goodwill into one manageable term, interest-only elements that help a deal service when goodwill valuations are high, and unsecured options up to mid-six figures that avoid valuation and legal fees. For startups that have grown fast, we explain how stronger accounts after 18–24 months can open the door to cheaper, longer-term facilities that consolidate asset finance and free cash to complete surgeries.

You’ll hear practical, anonymised case studies: clients cutting thousands per month by shifting to partially amortising structures without borrowing more, buyers who held repayments steady while fitting out additional surgeries, and a bridge-to-refi path that secured a property before planning, later simplified through an unsecured refinance. We also discuss evolving bank policies—longer goodwill terms, flexibility around leases, and rising loan-to-values—and why matching products to your practice plan matters more than picking a single “best” lender.

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Dr James:

Whenever you finish the episode, all you have to do is click the link in the podcast description. It'll take you right through the Dentists Who Invest website. You'll be able to complete a talk questionnaire on Want Past. You fill in your reflections, and we'll go ahead and email over to you your verifiable CPD certificate, which is entirely free. What that means is this podcast episode will be able to contribute towards your verifiable CPD hours during this learning cycle. Now then, practice refinance. Is that the terminology, Kevin? That's what we're here to talk about today. I guess the best place to start would be to describe what refinance is specifically. Start from the very, very, very basics.

Kevin:

Hi James. Yeah. You know, refinance. I think all of us tend to think about interest rate when we we think about mortgages really, and uh it comes to the end of a deal and you need a new interest rate. Um I mean there's so many more reasons in commercial finance as to why someone should refinance. Um and it covers such a broad range of reasons as well. But let's start with the rate, because that's the one everyone thinks about. Um I mean, especially following the credit brunch, uh, rates were pumped quite up quite a lot. Um so there's a lot of people in those kind of deals which could who could be benefiting from a cheaper deal or restructuring of their loans simply just to make a monthly saving. Um but that brings me on to the next point, which is actually monthly payments, because in some respects, that's the more important issue. It's not the interest rate as such. With commercial finance, it's often good advice not to try and pay it off quickly and focus on your personal debt. Um, so getting your monthly payments down uh for to keep the cash flow um positive is somehow more important, and that might mean terming the loan over a longer period rather than having a cheaper interest rate. So yeah, there's a lot to this, it's not just the interest rate, um, and that's something we use that quite a lot, you know, to keep payments down for people so they can then go and spend the money on other things. Um there's also uh raising more debt, which covers so many different issues, such as um buying a freehold for your practice. Um it could be literally buying equipment or refurbishing the practice as well. Um, or it could be a second practice purchase. So you've got all of this equity in the goodwill of the first practice. So what we do is we look to unlock that for all of these purposes, and it's the cheapest way to borrow money. It's cheaper to borrow money on a 15 to 25 year term, depending on what you're on, rather than going and getting a five-year equipment finance loan. So if we can do everything at the same time and you get cheaper monthly repayments on your existing head bank loan, and we're we're satisfying one of these other needs as well, that is a very common request for refinance that we see at the moment. Um on top of that, uh, for example, we could have um a SWAT practice. Uh you know, there aren't so many banks lending for startup, um, and the ones that do will obviously pump the interest rate up a bit because it is more risky than buying an established practice. So once the practice has built up a trap record, that could be 18 months down the line or two years, depends on the financial accounts you're producing. You then uh there's then a goodwill attach um attached to that practice. So we can go out and then start looking at all of the loans that attract much lower interest rates. Uh so that that's another good reason for for looking at refinance. Um and then there's people, and and it could be people that started practices up, or it could just be general practices where people take a lot of short-term debt, um, which is really easy to get your hands on, and there's a definite need for it because we offer that uh as well. Um, however, sometimes people take too much on, it tips the scales, and their monthly payments are just too high because all of the debt's been paid off over three to five years. So we might want to refinance that um onto the practice loan over 15 years or 20 years or whatever it is. Um and the banks may sometimes kick back on some of those loans, but if if there's five loans and we can get three or four of them through, then that will make um monthly payments cheaper for a dentist. So I've really whizzed through that there. Uh, and there are so many reasons for refinancing, and people often don't think about it being refinancing, such as we mentioned um on purchasing a second practice. You don't often think about the fact that you're you know you're refinancing your first practice. Um, and it's a it's an opportunity for us to look through all of the finances of the client and actually see how we can save money. It isn't just on raising the money they need, it's you know what's happening with their existing debt and how we could how can we keep those monthly payments as cheap as possible.

Dr James:

Interesting. So this would be we recently did a podcast on 100% finance, right? So this would be that would obviously be bought you borrowing against the value of the new practice, but the refinance would be you borrowing against the equity in the old practice. Have I got that right?

Kevin:

That's right. Yeah, we we did cover that a little bit, didn't we? Uh and this this particular podcast we're doing today does link into that a little bit and also to the podcast that Dan Firan did with you on the blended loan, because they're two different products that we have. Um, but yes, yeah, it it all links in.

Dr James:

There is quite a lot to it, really, when it comes to finance, is is what I'm learning the more of these podcasts that we do. Kevin, there's a lot of ins and outs to it, shall we say? So I guess it takes a lot of expertise to be able to figure out what's the best, really. And uh, no, it's interesting because I would have just thought finance is finance, but there we are. And that kind of brings me on to my next question, which is I guess uh when it comes to you helping people with this stuff through what you do, given that obviously your bread and butter is practice finance, what would you say someone's options are whenever they come to you, whenever they're uh purchasing a practice? Let's say for the very let's let's say for the second time, right? If you could high-level just read off your toolkit, so to speak, it's you know, it's a refinance uh versus versus other things that are out there. How does how does that look? What comes into the competition? If you're a UK dentist and you wish to add to your verifiable CPD portfolio for this learning cycle, it's worth knowing that Dentists Who Invest has over a thousand minutes of free verifiable CPD on our website. Just simply head over to www.dent2invest.com and hit the video slash DPD tab, and you can go right ahead and help us out to as much CPD as you need. You'll also find a link that takes you straight to the CPD section of the Dentists Who Invest website in the podcast description.

Kevin:

Yeah. Yeah, so just picking up on the point you made, um, the nicest uh feeling we get is when we analyze a client's finances and restructure the finance, and the client says, Oh, I never thought I could do that. And that's really so surprising, you know, what I could have achieved with with with the the products you've got now. Um and my take on it is this in the past, um particularly when I was in the bank, it was probably more about who had the cheapest interest rate. But right now, I think there's never been a time when banks are all lending so differently to dentists. So um, so in the toolkit, we have a real variety of loans. Uh, I mean, there was a a um podcast with Dan that you did about blended loan, um, whereby someone can uh blend the property and the goodwill loans. And the reason the banks tend to split those is because of risk. A secured loan against the property is a lower risk, so it gets a different interest rate in a longer term, and a goodwill loan is a higher risk, so it's a shorter term and a higher interest rate. The blended loan mixes them together. And often, if it was 25 years and 15 years on the term, the blended loan may be 20 years, for example. But that's excellent if you're buying a practice and the goodwill's a million and the property's 200,000, because suddenly you can turn that million pound over 20 years. That is worth so much more than a really cheap interest rate in terms of monthly payments.

Dr James:

I hear you, I hear you.

Kevin:

Bring them right down. So we have to consider all these things. It's not, as I say, it's not just about the interest rate. So starting off with that, the blended loan uh just talked about, and Dan actually did the podcast with you on. Um, in addition, we have uh we don't have any full evergreen, what we call evergreen interest only loans with no repayment whatsoever, but we do have some partially amortizing loans where the larger chunk of the money sits on interest only and a small amount pays off over five years. That's a great product, um, and that basically attracts a very low interest rate. Um, and you know, a lot of clients do pick up on that, especially if it's a high purchase price on a practice and it's not quite working in terms of a debt serviceability. Um I'm mentioning that because that is the biggest issue I think I see today, uh, because goodwill values have risen again recently. Um and let's be honest, owners, um, agents, and valuers are valuing against the potential of that practice going forwards. But you may have an older dentist who's done a really good job, hasn't got any debt to service, doesn't want to do implants and invisalign. And so, as bankers, we're analyzing the loan based on the last three years of the current owner. So trying to get the practice financials to service this quite large debt now based on uh evaluation on what the practice is going to do when a dentist goes in is quite difficult. So we need to use some of these products, such as um the interest-only product, which brings the payments right down. Um, another one is um the uh term of the um loan. There's been, as the, as I said before, a big policy war going on between the banks, and we've got loans now extending out to 20 years on goodwill as well, which is so important to help manage um that high level of debt. Um, we also have unsecured loans, and I really like this one. The unsecured loan up to 750,000, and we mentioned that in the 100% finance um uh podcast. So that can work really well if you want to avoid all of the fees that are attached to refinance, such as a valuation fee or legals, etc., because that product literally they they look at over, look at the financials and say, right, no valuation, no legal fees. Here are the security um forms to sign, and and off we go. So uh that can work really well uh as well. Uh we obviously have the standard fully committed loans, and by that I mean the loan over 15 years of goodwill or 25 years for um for property, and the rates on those are lower than they were 10 years ago. So um so even those products, if that's what a client really wants, that they'll still hopefully be cheaper now than they were uh back whenever they bought practice. Um there is, as I said earlier, a bigger commitment to lend over longer term and higher loans of values, um, and for sometimes terms exceeding the lease, because historically banks have pinned the loan to the term of the lease. So 15-year lease, you get a 15-year loan. That's it, end of story. Whereas now the banks have gone a little bit past that, as long as the loan's paid down sufficiently. So all of these things um, I guess, are measures being taken to counter what I mentioned, which is the fact that goodwill values are sky high. And as we know, there's far more um expenses attached to practice these days. And so the rework profit hasn't grown at the same rate as perhaps fees have or goodwill values. Um, so hence the the change in all these products. But but that that you know, that's a brief overview of some of the products we've got available, and they're not available across all banks. The bank, so one bank's got the blended loan, one bank's got the partially amortizing loan, and and it we really have to know all of those products and know all of those banks well, and we sit down regularly with them to go through all of that.

Dr James:

Awesome. Okay, thank you for that uh explainer. Uh, and it just circles back to what I was saying just a moment ago. It really is not just as simple as we get finance for the practice, it's about knowing all of our options. Very useful. And as you say, would would I be right in saying the two main levers that determine the repayments every month are the interest rate and the length of term?

Kevin:

Yes, yeah, obviously amount of a debt. Yeah, but yeah, no, you're right. Yes, it is. It's the term of the yeah.

Dr James:

So are those the only three variables then?

Kevin:

Um yeah, pretty much. Yeah, I mean, I mean yeah, you you could have an interest-only period at the front, it's it's a bit more complicated than that, but but generally the three things you're looking at is amount of a debt, interest rate, and the term of the loan.

Dr James:

Good to know. Interesting. And can you give us any case studies of let's say somebody I mean, I imagine there'll be a lot of people out there who have dental practice, and this is this is particularly pertinent to refinance. Here's the classic person that I can think of when it comes to refinance. They have financed in their dental practice. Maybe they're plodding along, they've had the practice a little while, they're plodding along, they're making money every month, but they could always do with making a little bit more, and maybe part of what causes them to feel the pinch is the repayment on their debt. Have you got any case studies of people in that situation where you've restructured what they did and uh it made a significant impact, even going right down to figures and stuff like that, all anonymized, of course, I'm sure.

Kevin:

Yeah, I mean I haven't got exact figures, but I've got rough figures here on a few different places to give you a feel for it. Because as I said, it's not quite as simple as that. I mean, we have numerous cases where um somebody, for whatever reason, is struggling a bit, um, and we've just looked at all the loans, and maybe they're on a standard loan, and we put them onto the partially amortizing loan, the the interest only. I think Dan mentioned the case that we had um in his last podcast, and there was a huge monthly saving on that uh for not actually borrowing any extra money, just reorganising the debt a little bit. Um, so we've got that. We we regularly have to deal with clients who want to buy a second practice as well. Um, and as I said earlier, part of our job is not just to raise the debt on the first practice and um and on the second practice. You know, with the second practice, you're buying additional income, um, but you're also going to take on a pretty hefty debt. So we go back on the first practice and look at all of that, look at the short-term debt. How can we make all that cheaper? So numerous on those, but but I've also got some others. Um, so for example, I had a um a startup client who did amazingly actually, his practice really went well. Um, in fact, I've had two clients like this, uh, and after 18 months, we sat down and looked at it and said, well, okay, the you know, this is like a fully established practice now. Um, and he had taken on a lot of short-term debt in addition to his existing uh bank debt, and two loans roughly equaled each other out. So we used the that unsecured facility I mentioned um to take out the head bank loan and put it on a cheaper rate, to take out all the asset finance equipment loans and put those on a cheaper rate over a longer term. But in addition, we raised 50% of that finance again to finish off the practice and kit out two or three more surgeries, and the final loan repayment equaled what he was paying at the start, which was obviously for uh two-thirds of the loan that he ended up with. So now he's got the practice fully completed and he can um generate far more fees from the extra surgeries as well, and he's not paying any more than he was in the first place. So that's that felt like a really good outcome. Um that was using the unsecured loan. Uh, we also had um a client that wanted to buy a property to relocate into, but we couldn't get the planning changed commercial before, so we couldn't get the big banks to lend. So we raised the money on a bridge. Um, and that was great because it allowed him to buy the property, apply for planning, get all that changed. But obviously, it comes with costs as well. We had to have a valuation, do some legals, etc. So when it came to refinancing it, we said, Well, I don't really want to pay all of that again. So again, we used that unsecured product because all of the bank really needed was his financial accounts uh to crunch the numbers down, and they were happy to lend, I think it was 700,000 to um basically refinance the property and to you know to get it out as well. So so that was good. Um and then we've also had people on just straightforward um uh loans with the bank that have been sitting there for far too long, and we've gone in and looked at it and pushed them onto the partially amortizing loan and save the client in the region of £4,000 a month, which they can then use actually for drawings and investments and all the things they want to do in life. So there was a there's a again, that was a very brief spluttering of um of cases there. Uh and you know there's so many, I find it hard to remember them all actually, because as I say, refinance is so broad and something we're doing every day.

Dr James:

Cool. Brilliant. Well, thank you so much, as ever, for your insight, Kevin. Just worth mentioning before we wrap up, is there anywhere that anybody listening to this podcast can find you off the back of what you said today?

Kevin:

Yes, uh, they can call on and all of this is on the webpage, but just in case, the mobile is 07801440622. Um, and the best email address is actually info at saroma.co.uk because both myself and my associate Dan cover that email address, so one or the other of us will get back to the client.

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Dr. James Martin

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