Funding a Squat Dental Practice: the Startup Loan, Staged Drawdown and Lender Conditions

Building a dental practice from scratch is one of the most ambitious routes into ownership, and it is funded quite differently from buying an existing practice. A squat opens with no patient list and, crucially for a lender, no goodwill. There is no income-producing intangible to secure against, so the question is not "how much of the goodwill will you lend" but "how much of a build will you fund, and against what." That single difference shapes the whole conversation: the deposit or contribution expected, the business plan demanded, the way the money is released, and the conditions attached to drawing it down.

This guide stays strictly in the lending lane. It covers how a squat is borrowed: the startup loan and how much lenders advance, the business plan they expect, staged drawdown against fit-out milestones, the Care Quality Commission and NHS-contract conditions that gate the money, and how the loss-making ramp months are funded. The tax of the early loss, the capital allowances on the fit-out and the loss reliefs that turn the ramp into a refund are a large subject in their own right, and we keep them to a summary here and link to the guides that cover them properly. The figures are illustrative and the position is 2026/27.

What a squat practice is, and why funding it is different

A squat practice is built rather than bought. The dentist finds premises, fits out the surgeries, specifies and installs the equipment, registers with the regulator, recruits and opens the doors, all before a single patient is on the books. Because there is no established list and no purchased goodwill, the income starts at zero and builds, while the costs run from day one. For a lender, that removes the asset an ordinary acquisition loan leans on. When a dentist buys an existing practice, the lender is really lending against the goodwill, the income the patient base reliably produces, which is why the professional-category route can stretch to 100% of goodwill and equipment. A squat has none of that on day one.

So a squat lender is underwriting a plan, not a trading history. It is closer to a genuine business startup loan than to a practice-purchase facility. The security shifts onto the fit-out assets, the equipment, the dentist's personal covenant and, above all, the credibility of the forecast. That is why the terms differ: a contribution is usually expected, the plan is scrutinised harder, and the money is released in stages rather than all at once. Whether a squat is even the right route versus buying an established practice is a separate decision, which we weigh in our guide to squat versus buying an existing practice. This page assumes the decision is made and deals with the money.

What it costs to build a squat, and the three funding blocks

A squat build breaks into three blocks a lender will want to see priced separately, because each is funded slightly differently:

• Fit-out and building works. The surgeries, decontamination room, reception, waiting area, drainage, electrics, compressed air and extraction. This is the largest single block on most builds and the one that must be substantially in place before the practice can be inspected and registered.
• Equipment. Dental chairs, imaging (from intraoral units to a CBCT scanner), autoclaves and decontamination, and any CAD/CAM. This can be rolled into the main facility or placed on separate asset finance, a choice we return to below and cover in the equipment and chair finance guide.
• Working capital for the ramp. The cash to cover rent, staff, marketing and finance costs while the patient list builds and the income lags behind. This is the block dentists most often underfund, and the one a lender will test hardest.

A typical two-to-three-surgery squat runs from around £200,000 to over £400,000 across those three blocks. The detailed cost breakdown, room by room and item by item, is set out in our guide to the cost of setting up a dental practice. The point for funding is that the three blocks have different risk profiles: the fit-out and equipment create tangible assets, while the working capital funds a period of planned losses, and lenders treat them accordingly.

The startup loan: how much lenders advance, and against what

Because a squat has no goodwill, most lenders expect the dentist to contribute a share of the cost, commonly in the region of 10 to 30 percent of the fit-out and working capital, with the balance advanced against the plan and the dentist's covenant. A strong clinical track record, a well-evidenced local demand case and a conservative forecast can reduce the contribution; a thin plan or a difficult location increases it. This is the key contrast with an established-practice purchase, where the income-producing goodwill lets the professional category fund up to 100%. On a squat there is simply less to secure against on day one, so the lender shares the early risk with the borrower.

What the lender is really pricing is the ramp: the depth and length of the cash deficit before the practice supports itself. The advance therefore rests on the covenant of the dentist, the tangible value of the fit-out and equipment, and the strength of the forecast, rather than on a trading history that does not yet exist. Security typically includes a charge over the practice assets, often a debenture where the borrower is a company, and a personal guarantee from the principal. None of this is unusual for business lending; it simply reflects that the lender is backing a build and a plan rather than an income stream that is already running.

The business plan lenders expect

The forecast is the asset a squat lender lends against, so it carries more weight here than in any other practice-finance conversation. A credible plan sets out the fit-out budget and the equipment schedule, then models the patient-acquisition ramp month by month: how many patients register or convert each month, the marketing spend driving that, the staff and cost base running alongside, and the month the practice reaches cash break-even. The lender will stress-test the assumptions against local demographics, the NHS or private model, competing practices nearby and the dentist's own clinical capacity to deliver the treatment the forecast assumes.

Two things separate a plan that gets funded from one that does not. First, it funds to the cash low point with a buffer, not to an optimistic short ramp, because the deficit is deepest a few months before break-even, not at opening. Second, it is built on defensible numbers rather than aspiration. A specialist dental accountant building the ramp cash-flow forecast alongside the business plan is the single strongest thing a dentist can do to improve the terms, because it gives the lender a forecast it can trust. The government-backed Growth Guarantee Scheme can also sit behind a startup facility where a lender uses it, providing a partial guarantee that can help a squat clear the credit committee.

Staged drawdown: releasing the money against milestones

A squat loan is rarely released in one lump. Instead the lender advances it in tranches tied to milestones, which protects the lender, matches the borrowing to the spend, and keeps early interest cost down because interest usually accrues only on the drawn balance. A common three-tranche structure looks like this:

Tranche	Released on	Funds
Tranche 1	Lease signed and CQC application lodged	Fit-out and building works
Tranche 2	Equipment ordered and installed	Chairs, imaging, decontamination, CAD/CAM
Tranche 3	Registration in place and practice opening	Working-capital buffer for the ramp

Each tranche is released against evidence that the milestone is met, invoices, an installation sign-off, confirmation of registration, so the money follows the build rather than sitting idle. It is worth structuring the drawdown so that the working-capital tranche is available at opening, when the deficit begins, rather than being drawn early and eroded before income has started.

A worked drawdown timeline: a £250,000 squat

Take an illustrative two-surgery squat costing £250,000: roughly £120,000 fit-out, £80,000 equipment and £50,000 working capital. Assume the dentist contributes £40,000 and borrows £210,000, released in three tranches over the build.

• Month 0 to 3. Lease signed, CQC application lodged. Tranche 1 of about £120,000 funds the fit-out. Interest accrues only on that drawn amount.
• Month 3 to 5. Equipment installed. Tranche 2 of about £80,000 (net of the dentist's contribution) funds the chairs, imaging and decontamination.
• Month 5, opening. Registration granted. Tranche 3 working-capital buffer of about £50,000 becomes available to fund the ramp.
• Months 5 to 18, the ramp. A capital-repayment holiday or interest-only period, often six to twelve months on a squat, keeps the practice from repaying principal while the list is still building. Cash break-even is targeted somewhere around month 12 to 18, after which full repayments begin.

The figures are illustrative, but the shape is typical: the money is drawn as the build progresses, interest is contained by only drawing what is needed, and the repayment structure is bent around the ramp so the practice is not asked to service principal before it can. The right structure keeps the cash requirement manageable through the hardest months.

CQC registration and NHS-contract access as funding conditions

Two regulatory conditions run right through a squat's funding, and a lender will attach them to the drawdown. The first is registration with the Care Quality Commission. A practice cannot legally provide dental care until it is registered, so no income can start without it, which makes registration a gating milestone. Lenders will usually fund the fit-out before registration is granted, because the premises have to physically exist for the CQC to inspect, but they condition the working-capital tranche and the start of repayments on registration being in place. The CQC's guidance for dental providers sets out the process, and because timing slips are common it should be started early and treated as a hard dependency in the drawdown schedule.

The second condition, where the model is NHS, is access to a contract. NHS dental contracts are commissioned and allocated regionally, and a new squat has to secure one through that process, which is not guaranteed. A private squat needs no contract and can open once built and registered, but its income then rests entirely on attracting fee-paying patients. Lenders regard a secured NHS contract as a strong, predictable income covenant, underwritten by NHS Business Services Authority contract payments, so where one is in place it can improve the terms and shorten the modelled ramp. Where it is not, the forecast has to carry the private demand case on its own. Our guide to the NHS contract essentials for dentists covers how that income works.

Funding the loss-making ramp, and the tax in brief

The defining financial feature of a squat is that it loses money first. The income builds slowly while rent, staff, marketing and finance costs run from opening, so the practice consumes cash through the ramp until the list reaches a viable size. That cash gap has to be funded now, in advance, which is what the working-capital tranche and the repayment holiday are for. The common and costly mistake is to fund the fit-out and equipment carefully and then underfund the ramp, running out of cash a few months before break-even. Build the forecast to the low point and fund to it with a buffer.

There is a valuable tax dimension to that early loss, but it belongs to a different lane and does not fund the ramp in real time. In short, an unincorporated dentist can often turn the opening loss into a cash refund by carrying it back against earlier income under the early-trade-losses rules, and the fit-out generates large capital allowances that drive the loss. Those reliefs improve the eventual outcome, but the refund arrives months after the loss, so the working capital still has to bridge the gap in the meantime. We cover the loss-year tax position, the capital allowances and the loss reliefs in full in our companion guide to funding a squat through the ramp and the loss-year tax position. Treat the finance and the tax as two separate workstreams that a broker and an accountant handle in parallel. The deductibility of the interest on the borrowing itself follows the standard trade-purpose test in the HMRC Business Income Manual, and the fit-out allowances follow the HMRC Capital Allowances Manual.

Where a broker and an accountant fit, and how to structure the equipment

A squat is the clearest case in practice finance for using both a broker and an accountant from the outset. The broker sources and structures the startup loan and the drawdown, matching the request to the minority of lenders comfortable funding a build with no trading history. The accountant builds the ramp cash-flow forecast the lender underwrites against, chooses the trading structure with the loss position in mind, and plans the loss-relief claim so the early loss produces cash later. The forecast and the funding are two sides of one case, and the plan is only as fundable as the numbers behind it.

On the equipment, there is a funding choice worth making deliberately. Rolling the chairs, imaging and CAD/CAM into the main startup facility keeps everything on one schedule and one rate, which suits a single fresh build. Separating them onto dedicated asset finance can preserve working-capital headroom and match each asset to its own term, and it suits later upgrades once the practice is running. That funding decision is separate from the tax treatment of the equipment, which our equipment and chair finance guide and the capital allowances pages cover. If the practice later needs more working capital than the ramp buffer allowed, or the terms can be improved once trading, our guides to working-capital and tax funding and to the wider route into practice ownership set out the options.

A squat is a genuine business startup, and it is funded like one: a contribution, a plan the lender can trust, money released in stages against milestones, and a repayment structure bent around the ramp. Get the forecast and the drawdown right before you sign, fund the ramp to its low point, and the build becomes an asset you have created yourself rather than a cash squeeze you did not see coming.