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Merchant cash advance for dentist
Managing cash flow and absorbing emergency funding needs are key requirements for running a successful dental practice. In a pressured environment where an unexpected equipment failure or staffing shortage can cause significant disruption, the ability to react quickly and confidently to a capital need is essential.
Merchant cash advances are a fast, short-term funding solution that dentists can use to avoid having to cancel clinics. At Clifton Private Finance, we have advisers experienced with the specific needs of dentists and dental practices, here to help you get the flexible funding you need to meet compliance needs and satisfy patients.
Merchant Cash Advance Explained
A merchant cash advance (MCA) is a form of revenue-based funding, where capital is provided based on confident future income forecasts. Tied to debit and credit card transactions, MCA utilises your proven history of card-based income to underwrite a short-term capital advance that can be acquired quickly.
Rather than set monthly repayments, MCA is repaid as a percentage of your card transactions, adjusting in line with your monthly receipts. This provides a flexible repayment structure, reducing the balance quickly when card transaction income is strong, and avoiding unwanted pressure when income ebbs.
Factor Rate and Holdback Percentage
Unlike a traditional loan, MCA does not generate interest at a monthly or annual rate; instead, the lender assigns a multiplier to the advance. This factor rate means the balance to be repaid is simple to calculate and fixed. Factor rates are typically between 1.1x and 1.5x, depending on the size of the advance, your practice’s card transaction volume, and creditworthiness.
The scale of repayment is defined by the holdback percentage, a pre-agreed cut of future card transactions. Holdback percentages are typically between 10% and 25%, negotiated based on your need and lender confidence.
For example, a £20,000 MCA with a factor rate of 1.2x and a holdback of 20% will result in a total balance of £24,000, repaid with 20% of card transaction income each month until the balance is cleared.
The Uses of Merchant Cash Advance for Dentists
A merchant cash advance is a short-term funding solution where convenience and accessibility is balanced by a slightly higher overall cost (when compared to secured loans or asset finance).
For dentists, its prime advantage lies with the swift nature of the application process and acceptance, which can provide significant capital for immediate use. .
Dental practices considering MCA often have one of the following specific scenarios.
Merchant Cash Advance for Equipment Replacement
Dental equipment is specialist and capital intensive - it is also business critical. A broken dental chair can make an associate unable to practice for weeks, while damage to a dental X-ray sensor or intraoral scanner can affect the whole surgery, causing chaos with delayed appointments and uncontrolled backlogs. Replacing a key piece of equipment needs to be done quickly to minimise downtime and avoid putting patients through unnecessary pain due to delays.
Asset finance, often used by dentists to spread the cost of expensive core equipment, can involve lengthy applications, especially in specialist situations.
While this is acceptable when planned as part of a normal business set-up or expansion, it fails to meet the needs of a genuine emergency. Merchant cash advances, by comparison, can offer the much-needed capital quickly, enabling you to keep the practice operating without costly disruption.
Merchant Cash Advance for Lab Work Cash Flow
Outsourced lab work is an essential component of any private dental surgery, forming part of the comprehensive package that patients rely upon from dentists today. However, when those same patients rely on payment structures that allow them to spread the cost of their dental treatments, the practice can come under a similar pressure - paying for a patient’s lab work before you’ve been paid demands instant capital.
Merchant cash advances can bridge this cash flow timing mismatch, providing the short-term funding needed to meet lab work costs during periods of stretched cash flow.
Merchant Cash Advance to Meet Staffing Needs
Staff emergencies can change at extremely short notice, from sudden illness to an associate moving on without warning. Filling a post in a dental surgery to maintain consistency can cause a significant drop in liquid capital, especially when considering the heightened cost of locum or experienced administrative cover.
Nonetheless, it must be met to avoid the greater loss of revenue that comes from rescheduled or cancelled appointments.
Merchant cash advance provides a way to raise much-needed funds, with the repayment dealt with in the following months.
Merchant Cash Advance to Meet CQC Requirements
While planned improvements and general maintenance to meet compliance regulations should be factored into the long-term financing for your dental practice, an inspection that results in immediate actions required must be dealt with without delay or the consequences for the surgery will be significant.
Unplanned spend to deal with unexpected Care Quality Commission findings may include emergency equipment repair or replacement, the need to employ specialist contractors, or changes to sterilisation processes.
An MCA could provide the funds necessary for you to rectify any overlooked requirements, spreading the cost of essential work and ensuring that the business remains open throughout.
An Illustrative Example of Merchant Cash Advance for Dentists
Clive and Suraya are partners, running a moderate practice of three dentists in a rural location. With a mixture of private and NHS clients, approximately 60% of their income is taken via card transactions.
Despite Clive’s best attempts, repairs are advised to take between three and six weeks. The partners conclude that given the age of the unit, a quick replacement is a better alternative.
However, despite having some capital available, they are still £25,000 short of being able to buy one.
Clive and Suraya’s MCA Repayments
|
Month |
Card Transaction Turnover |
Repayment @ 18% |
MCA Balance |
|
September |
£58,400 |
£10,512 |
£23,988 |
|
October |
£56,150 |
£10,107 |
£13,881 |
|
November |
£60,800 |
£10,944 |
£2,937 |
|
December |
£51,900 |
£2,937* |
£0 |
*The final repayment clears the balance of £2,937, representing only 5.66% of card transaction turnover.
Buying the new chair and delivery unit meant they could both work at full capacity and neither the practice nor the patients suffered. The advance was cleared within four months.
MCA Considerations for Dentists
Merchant cash advances are a short-term solution that provide cash flow support and capital for immediate needs. They’re less-favourably matched for long-term use in dental practices.
Alternative funding should be used for needs such as:
- Marketing - The repeated, campaign nature of marketing is best met with traditional loan structures, where a static monthly repayment can be balanced against the effectiveness of the marketing.
- Renovations - Refurbishing and modernising your surgery is often funded through property-secured finance, such as a remortgage or second charge loan. For leased premises, fit-out finance provides a structured and optimised approach.
- Planned equipment purchases - Asset finance is specialised funding for high-value machinery and equipment purchases where immediacy is less required. In some cases, asset finance can be explored to refinance dental equipment bought with MCA.
- Cars and vans - Bespoke vehicle finance offers flexibility, lower costs, and support, specifically structured for vehicle purchases.
- Long-term expansion - Other growth opportunities that require financing over an extended period usually benefit best from business loans that are tailored to fit specific needs.
Discuss your precise needs with your Clifton Private Finance adviser to compare the finance options and choose the funding that’s best for your dental practice.
Merchant Cash Advance for Dentists - FAQ
Is MCA Suitable for NHS Dental Practices or Only Private Clinics?
A merchant cash advance is provided based on your income from card transactions. You’ll need to show a history of card transactions and provide a realistic forecast.
Private dental practices tend to have proportionally more card transactions than NHS-funded surgeries, but there is no other specific reason why an NHS practice cannot benefit from MCA.
If your card transaction history shows a strong card-based turnover, then it is worth considering a merchant cash advance.
How Quickly Can a Dental Practice Get Cash Through MCA?
The digital nature of card transactions means completing a merchant cash advance application with Clifton Private Finance can be done quickly, and our advisers can discuss your needs and often match you to an appropriate lender on the same day. Applications are often approved and advances paid into your bank account within 48 hours.
Will Merchant Cash Advance Affect My Ability to Obtain Other Finance Later?
Because a merchant cash advance is not a traditional loan, it doesn’t appear in the same way on your credit report and will not affect your credit score. However, the repayments and holdback percentage will impact any affordability checks that lenders undertake in many loan applications.
Discuss your concerns with your CPF adviser if you are planning any future loan applications before the MCA is expected to be repaid.
What Happens to Repayments if Patient Numbers Drop?
A merchant cash advance is repaid as a percentage of your card takings. If your card transactions lower in the future due to fewer patients, then the MCA repayment reduces in proportion. This may make it take longer to fully repay the advance, but it avoids putting too much stress on your cash flow.
Should your business experience periods with no card transactions (zero-revenue months), then the lender may contact you to discuss an alternative arrangement.
How Do Lenders Assess a Dental Practice for MCA? What if I Have Bad Credit?
A merchant cash advance is primarily assessed against your card transaction history and forecast. Lenders will look at credit history, but as a secondary consideration only.
For this reason and thanks to its flexible repayment structure, MCA may be an effective form of funding if you are going through a period of capital stress.
Discussing your situation in full with your Clifton Private Finance adviser is important, so that we can provide the proper support and help accordingly.
What Are the Risks of Using Merchant Cash Advance for a Dental Practice?
MCA is a short-term finance product that is typically suited to providing capital to meet a quick turnaround or cash flow support. It should not be used for long-term funding.
The simple factor rate-based structure of an MCA makes it easy to understand, but it’s not always cheaper than an interest-based traditional loan. Expert advice can help you compare the two different structures to determine which is more beneficial for your practice.
As with all finance, due time should be given for full consideration before taking out an MCA. Over-reliance on advances, including ‘stacking’ MCA by taking a second advance either before an existing one is repaid, or immediately afterwards, will harm your practice’s long-term financial stability.
Speak to Clifton Private Finance to properly evaluate an MCA for your circumstances before completing an agreement.
Merchant Cash Advance with Clifton Private Finance
Clifton Private Finance is a specialist whole-of-market business finance broker. Our business loan specialists have experience working with dental practices to deliver funding solutions that support both long-term and short-term goals. With our help, you can obtain the most appropriate finance for your needs, from merchant cash advance to property-secured funding.
Our advisers will work with you to build a comprehensive overview of your business funding requirements, evaluating your income and expenses to explore multiple options.
For dentists with significant card transaction histories, merchant cash advance offers a rapid, flexible option suitable for many uses.
Partnering with Clifton Private Finance means:
- Access to the full range of UK MCA and revenue-based finance lenders
- Experienced advice and support
- Pre-approval checks and application administration
- An ongoing relationship for priority future funding
- Clear, unbiased explanations to help you make informed choices that are best for your practice, your colleagues, and your patients
Contact Clifton Private Finance today for a free consultation.
