We are already starting to hear about the health impacts of long-COVID, but what about the financial implications? Not only is the world being thrown into a recession and our taxes are being stretched to their limits, but to get though the financial hurdles you have to decipher different types of business loan schemes, and hope the government can still find money for continued furloughing, just to run your practice through this uniquely testing time.
The British Dental Association (BDA) has, since April, been in discussion with the government to try to ensure there is central money for dentists and their businesses but, as is often the case, dentists can get lost in the support given for the NHS and medical fields.
Feeling the pressure
In October 2020 The Dentist reported that Begbies Traynor Red Flag Alert research, who track UK businesses in ‘significant’ financial distress, categorised over 1,500 UK dental businesses in this category. This would suggest that around 16% of UK dental practices were experiencing financial difficulty last year. This highlights the increased costs of PPE, social-distancing and cleaning regimes associated with COVID-19 combined with a lower number of patients in attendance. On top of this can be added the restrictions and changes with permitted treatments and patients being nervous about leaving the house due to infection risk. Cumulatively this can cause significant planning and cash flow issues.
Whilst there is a range of financial support available (highlighted on the BDA’s website and below) it hasn’t always been easy to understand or access. The BDA reported that a quarter of practices had applied for a government support loan, but around 86% of those had been turned down.
NASDAL (the National Association of Specialist Dental Accountants & Lawyers), carried out a survey in August 2020 and found that 52% of UK dental practices had taken advantage of the CIBLS (Coronavirus Business Interruption Loan Scheme) or the BBLS (Bounce Back Loan Scheme) from the government. This equates to 11% of practices taking out the CBILS loan, mainly private practices, with the average loan being £105,000 (12% of fee income) and 41% of practices taking out the BBLS loans, with the average loan being £49,000 (7% of fee income).
The following support measures are available from the Government:
The Furlough scheme, which will remain open until the end of March 2021. Employees will receive 80% of their current salary for hours not worked, up to a maximum of £2,500. Flexible furloughing will continue to be allowed, in addition to full-time furloughing. The BDA have a guide to this scheme on their website.
Business interruption loans, with the Government paying the first 12 months' interest.
Bounce Back Loan Scheme (BBLS) that enable smaller businesses to get access to 100% taxpayer-backed loans, offering businesses loans up to £50,000. No capital or interest repayments are due for one year. The Government will pay the interest for the first 12 months.
£10,000 extra cash grants have been made to some of the smallest businesses, some dental practices with rate exemptions have received this.
The Government will refund up to two weeks’ Statutory Sick Pay (SSP) per eligible employee, and also pay from the first day of sickness. You do not have to wait three days before starting to pay it. SSP was also payable for those who were self-isolating in accordance with UK Government guidance.
Limited measures support the self-employed, with a £50k cap.
Dental hygienists and therapists are likely to qualify for help under the Government’s self-employment income support scheme.
Dentists having to make the painful decision to retire early and sell their practices due to long-term health issues is sadly not something new, as we at Dentists’ Provident know only too well. However, having to sell your practice because you just can’t fund a business and pay staff in an environment with an international health pandemic is new to us all. Some principals, as far back as March 2020 when the first evidence of the costs, trouble, stress and worry of operating their practice with a background of symptoms and cases, and a foreground of restrictions and PPE, decided it was time to step away from practice ownership. And because of this, after the first lockdown, many dentists sold their practices, with many retiring earlier than they had planned.
A notable change over the last 20 years has been fewer associates buying from their principals, due to a number of financial, practical and regulatory concerns. However, the silver lining on this very dark cloud could be that more opportunities are being created for associates to buy.
Whilst some larger dental groups haven’t been buying as prolifically as they once were, individuals have. Around 80% of Christie & Co practice sales since January 2020 have been to independent purchasers, and with more than 10,000 independent practices in the UK on their books, they have plenty to offer.7 In their first ‘Buyer Registration Index’, Christie’s figures show a 59% increase in buyer registrations since the UK eased lockdown measures.
Lis Hughes MD from Frank Taylor & Associates underlined this trend saying, “The biggest activity we have seen in 2020 is from associates looking to buy a practice. They are now seeing opportunities to be able to take control of their destiny, as it has been a hard year for them for two reasons. One is when practices returned to work after the first lockdown, many associates saw their pay rates, and therefore annual income, significantly reduced, and also the lack of government support for anyone earning over £50,000 a year.”
Lis continued “Not only has the number of potential buyers increased, but the geographical spread of practices for sale is changing. Not surprisingly the popular areas remain just that, however, practices are now being sold in areas where historically there has been less interest. This may reflect the change in the working patterns of the population at large; as more people work from home, rural settings are becoming more appealing.”
Lis concluded by saying “For those thinking of selling, the market is still very active, there are plenty of keen buyers, and lending to the dental sector also remains strong.”
One benefit of the current uncertain situation is that in any downtime, buyers and sellers can also take the time to be more prepared for the completion of the transaction, thereby aiming to make it less stressful. This includes collecting together information for the due diligence documentation, checking that accounts and processes are up to date and regulations are being complied with; and for buyers ensuring their funding is secure and that they are thinking about their business plans, approach, and team management for when they become owners.
Whatever impact COVID has had on your finances, career and business over the last year, try to make sure that any decisions you make, are taken with time and thought. Then through all of the unpleasantness we have experienced, there could still be some light at the end of the tunnel and the prospect of a new start.
References available on request.
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