Squat dental practice finance: funding a new practice from scratch

Buying an established practice means paying for goodwill, often the largest part of the price. A squat avoids that, lets you design the surgeries and workflow you want, and gives you a brand and patient base that is entirely your own. The trade-off is time and risk: a new practice has to find its patients one by one, and costs start months before income does.

There is also the NHS question. In England, NHS dental contracts are commissioned by integrated care boards and new contracts are generally awarded through a procurement process, so a squat cannot count on NHS income. Most squats open as private practices, often with a membership plan, and some later bid for NHS work if it is offered locally. That makes the practice's early income entirely dependent on attracting private patients, which is exactly what lenders probe.

• The premises. Legal fees and a rent deposit on a lease, or the purchase price if you buy; our page on dental premises finance covers buying.
• Planning and building control. Confirming the unit can be used as a dental surgery, and any consent for alterations.
• Fit-out. Partitioning, plumbing and drainage to each surgery, compressed air and suction, electrics, ventilation, a decontamination room with separate clean and dirty flows, accessible toilets and reception.
• Equipment. Chairs and delivery units, intraoral X-ray, often an OPG, autoclaves, washer-disinfectors, a compressor and suction plant, and increasingly an intraoral scanner.
• Radiation compliance. X-ray equipment must be registered with the Health and Safety Executive under the Ionising Radiations Regulations before use, with a radiation protection adviser's critical examination; HSE explains when to notify, register or apply for consent.
• Registration. In England, CQC registration as a new provider must be granted before you see patients; the CQC's page on registering as a new dental provider lists what the application needs.
• Systems and launch. Practice management software, a website, signage, a launch marketing budget and a plan provider set-up.
• People. Recruiting and paying a nurse and receptionist before opening, and training time.
• Running costs until break-even. Rent, wages, materials, lab bills and your own living costs while the appointment book fills.

The last item is the one most squat plans underestimate, and the one that causes most start-up practices real stress.

1. Site found and heads of terms agreed. Your own money pays for surveys, legal fees and professional advice.
2. Lease signed, CQC application made. Lenders usually want to see the lease terms and the planning position before committing.
3. Fit-out. Contractors are paid in stages, so the works facility needs to be available as invoices arrive.
4. Equipment delivery and installation. Asset finance lenders normally pay suppliers directly once equipment is delivered or installed.
5. Registration granted and opening. Working capital starts to be used as wages and rent run ahead of income.
6. The first year. Income builds with new patient numbers and plan sign-ups; cash is tightest in the early months.

Delays to CQC registration or the fit-out push back opening while costs continue, so build a contingency into the timetable as well as the budget.

Illustration only, with round hypothetical figures. A dentist with ten years' experience and an established following for cosmetic work leases a ground-floor unit on a busy road. The budget is £350,000: £160,000 of fit-out, £130,000 of equipment, £20,000 for software, signage and launch marketing, and a £40,000 reserve for the first months. The landlord gives a rent-free period in return for a fifteen-year lease with a break at ten. The equipment goes on hire purchase. The dentist puts £90,000 of savings towards the works and the reserve, and a term loan funds the balance of the fit-out. Only two of the three surgeries are equipped at first, with plumbing and services run to the third so it can be fitted once demand is proven. The dentist keeps two days a week as an associate for the first year.

The biggest risk is a slow ramp-up: patient numbers that take twice as long to arrive as planned, while loan repayments, rent and wages are fixed. Personal guarantees are normal for start-up lending, so if the practice fails, you remain liable; read our guide to personal guarantees first. Overbuilding is the other common mistake: fitting four surgeries on day one when two would do.

A squat is not the only way into ownership. Buying a small established practice costs more upfront but brings income from the first day, and lenders find it easier to fund; compare the two using our dental practice acquisition finance page. Buying into an existing practice as a partner or shareholder is a third route. Many squats begin as sole traders: borrowing of £25,000 or less by sole traders and small partnerships can be regulated consumer credit, which brings additional protections, and our page on sole trader loans explains more.