Watch out, you cannot trust your bank…

In the recession of the early 80’s, which I am old enough to have traded through, we used to say that the problem with bankers is that, ‘they hand out umbrellas when the sun is shining, but at the first sign of rain, they want them back.’ …Well nothing has changed, expect perhaps today they don’t even seem to be waiting for the rain, just a change or a tweak of policy at regional board level can spiral your stable, honest banking relationship into distress.

Traditionally dentists were considered to be a low risk category and therefore were actively targeted by banks as near perfect customers; they always borrow lots, are not commercially astute and never fail to pay it back. Over the last 12 months at Breathe, we have witnessed a significant change in the relationship that banks are having with some of our clients. Perversely not clients that are struggling, or clients suddenly demanding an increase in their facility, these are without exception, robust practices with rising sales lines.

Take five minutes to read this factual account of an established practice owner and long serving Breathe member who has been successfully running his own 4 surgery private practice for 18+ years.


“I transferred to my present bank in 1992 when I bought my practice.

I have a long standing overdraft facility of £70k. The overdraft facility has never been an issue in terms of renewal – it has been an automatic thing – sometimes a telephone call just to check that the level was OK, sometimes nothing but a fee debited from the account sometime between September and December and a letter to say the overdraft was renewed, sometimes nothing at all and then an apology that they hadn’t billed me for the renewal.

A new but experienced healthcare manager visited the practice this summer to introduce himself. As part of the meeting we discussed the future direction of my career, the practice and my style of providing dentistry. He seemed to understand the dental sector very well and was apparently concerned for the pressure that older practice owners felt with the new regulatory and business climate. I did not request additional funds or discuss altering the overdraft facility. As the facility was due for renewal the manager wanted to look at the options for the bank as they now prefer not to have long standing overdrafts. This included a different finance package of a loan instead of an overdraft.

You should know that:

  • All finance payments to the bank have been made on time in the past, the overdraft had a few hundred pounds un-cleared balance for a day or two last year.
  • The freehold of the practice is held as security by the bank
  • There is no loan on the practice property
  • The value of the practice property covers both the overdraft and total practice and personal liabilities. Our domestic mortgage is with another bank and is 20% of the property equity,

At the second meeting I learnt that the bank no longer likes private dental practices, they only like large NHS practices He told me that my present banking arrangements for the practice no longer fit their criteria. I did not request any alteration in our arrangements but the new manager had wanted to look at what they could offer.  The present overdraft was outside their new terms of business but the bank hierarchy wouldn’t agree to restructure the borrowing so that it did fit their criteria.

Their recommendation was to:

  1. Either sell the practice and realise many multiples of the overdraft facility through the sale, or,
  2. Find a new bank

I am currently in discussion with two high street banks and I really hope to have a new lender in place by the deadline my current bank has given me of April 1st 2012!”


So what advice can we give you to protect yourself against finding you and your practice in the same situation come the next review (or a request for an increase in your facility)?

Mike Hutchinson has compiled this simple real world guide to understanding the high street bank’s attitude in 2012;

  • Recognise that the old days are gone. So far gone in the banks mind that they think you have gone potty if you even refer to them
  • All applications are referred to the Credit Committee. The Senior Development Manager for Cornwall can’t make a decision on 500k finance
  • Repay-ability MUST be rock solid. All finance stress tested at the medium term forecasted base of 5.5%
  • In the bank’s mind, practice values are ALWAYS a multiple of EBITDA.
  • ALL practice values are discounted for security, the least of which is 70%
  • Turnover is NOT a critical measure, profitability is…


From Mike’s “real world guide to understanding high street banks”, I strongly suggest you anticipate a problem the next time you come up for a renewal of your facility.

Before this occurs you may want to test the water with say 2 banks and pitch your business as though your very survival depends on it. Do not over egg it, keep it factual and balanced but talk up your; growing patient numbers, your increasing new patient count, your growing average patient yields, your talented highly trained team and your profit growth plan for the next 5 years…

Learn from the response that you get from these two banks then ahead of the annual review invite your manger to the practice and pitch to him, blow his socks off with your balanced view of the commercial constraints of your enterprise and its potential.  With any luck he may just keep things the same for another year! In “2012 world” that would be a result!

Have a very Happy Holiday!!

If you would like help or just some advise on how to deal with your bank please contact me directly at or contact the Breathe team on 0845 2997209 |


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