Options for Veterinary Business Loans
Confused about the options for veterinary business loans? Between the SBA, conventional bank loans, and third-party loan offers, it can be difficult to determine which is the right choice for you.
In this article, you’ll learn about the different types of loans, what they’re used for, and when a business loan should be used.
What are Veterinary Business Loans Used For?
Veterinary business loans may be used for any business purpose related to the veterinary clinic from staffing to equipment and property purchase, however, the explicit purpose must be stated when searching for a new loan, as every loan program and lender has different requirements for eligibility.
Depending on the purpose, how you intend to utilize the loan may also change what documentation you will be required to provide if you refinance the loan or request loan forgiveness.
Veterinarian business loans are most commonly utilized to renovate an existing practice, refinance a practice, purchase new equipment, purchase a new business, or building a new location.
Any of these options are a great choice for the line of loans discussed here, and it takes a practiced eye to identify the key areas of growth in a veterinary business well before you decide to purchase or expand.
For more information on purchasing, selling, or financing a veterinary practice, contact BSF today through phone or email. Our team can help you make the right choice for your business, including help you choose the right loan for your current business standing.
3 Ways to Prepare for Getting a Veterinary Business Loan
Applying for a business loan may be commonplace, but it’s certainly not a simple step. When looking for options for veterinary business loans, you might want to consider what preparations your business needs to make before shopping around. Not every loan term or APR will be the right fit for your business, so you can narrow down your options by understanding what your business can work with first.
- CHECK YOUR CREDIT SCORE
For banks to lend money, they must first qualify the business as an entity that poses little risk in receiving their investment back.
Your credit score can influence your business’ ability to receive capital from a lender, as the bank must check how good you are at repaying debts before they are willing to invest any funds into your business.
If your business has taken out loans in the past, your business credit will be stronger and you’ll be able to take out future loans with more capital much easier than a first-time loan to purchase or start a business.
- DETERMINE THE TERM LENGTH
The term length is how long your business has before the loan amount is due in full, including any interest that has accrued on the account.
Some business loans operate in the short term with contracts due within 1-5 years of opening the account, however, most business loans will provide a lengthier timeframe of 10-25 years depending on the amount of borrowed capital and the business’ (or business owners’) pre-existing assets.
- UNDERSTAND YOUR BUDGET
By better understanding your budget, within the business’ coffers, as well as your own personal financial situation, you can make more informed decisions about your loan choices.
If you are purchasing a pre-existing business, then you’ll need to reference the prospective business’ profit loss sheets as well, as the income from the business is often intended to pay back the loan. This business’ finances, as well as any other business finances you are able to combine into repaying the loan help you make a better case for the requested amount.
New business startup loans, however, will require you to show personal proof of income as you won’t have a pre-existing business to showcase profit from the previous year, and startups are typically much riskier for lenders to borrow against. Personal assets may be put up for collateral using this option.
Ensure Your Accounting is Up to Date
Not only is an accounting service essential for keeping your business tidy, but it can help you get a loan when you need it most, or allowing you an influx of capital by selling your business when you’re ready to move onto the next big chapter in your life.
Keeping up-to-date accounting records will help create a smoother, more streamlined loan application process as well, as your documents will be ready for review with less stress and hassle on your side.
Properly documented accounting for businesses in good standing can even improve your chances of loan approval.
For more information on what you need to buy, sell, and finance a veterinary clinic, contact the experienced veterinary practice brokers through email or phone today. We can help you create a successful business from the start.
Keep Track of Any Expenses the Loan Paid For
While it’s something that most business owners will ignore, it’s good accounting and documentation to make note of every expense the loan paid for, allowing you to not only track where the funds went over what time period, but it can also help establish a record of expenses should the lender ever ask for proof that the loan was utilized to pay for certain expenses.
This is valuable especially when you are looking for refinance a loan or intend to request loan forgiveness.
With some lending programs, loan capital is held in an escrow account and purchases must be approved by the lender before going through, as the business owner doesn’t directly control the account. This protects the lender’s interests in the case of loans that are highly specific, such as payroll loans or equipment financing loans.
Set Up a Repayment Plan ASAP
One of the first things you should do when you open a new line of financing is set up a repayment plan to ensure you don’t miss a single payment. Accruing interest is an easy way to fall into debt as a business, as expenses will continue to mount on the total amount owed.
Repayment plans can be set up for the minimum amount due every month to prevent your business f rom defaulting on any payments, and manual payments can be made on top of this to lower the total amount. If you intend to pay the full amount back earlier than it is owed, however, it is important to first check the loan terms to ensure that there is no fee or penalty for early repayment.
What are Your Options for Veterinary Business Loans?
There are plenty of options available for veterinary business loans depending on what you intend to use the loan for, and what your current standing is with the IRS.
Many lenders are willing to take the risk involved with businesses that are already established, but for many business owners, this makes acquiring a loan difficult. (1) Fortunately, small business loans can help alleviate this pressure, providing lending options to business owners that doesn’t require a large, established business so long as they meet the eligibility requirements.
“[…] in fiscal year 2019, the U.S. Small Business Administration (SBA) guaranteed over $28 billion to entrepreneurs who otherwise would not have had access to capital to start, grow, or expand their small businesses.”
These small business loans for veterinary clinics can help new and established business owners alike refinance debts, purchase a new location or start their business for the first time.
SBA 7(a) Loans
This type of loan is offered by the SBA, or Small Business Administration. While it’s not specific to veterinary practices, it is a reliable and often flexible source of business loans for small businesses, which is defined as having 50 or fewer employees.
The 7(a) loan is one of the most common loan programs that the SBA lends under, making it the most widespread option for most small businesses to acquire lending assistance.
You can use this type of loan from everything from purchasing new equipment to refinancing current debts or purchasing additional office space.
Eligibility may depend on the business’ pre-existing income, credit history, and operating location, so it is ideal for business owners who have already established some kind of positive business history with the IRS. With a few extra documents, however, it is possible to receive this loan for purchasing an existing business.
Businesses that are eligible for this program are limited to small businesses borrowing a maximum of $5-million and operating for-profit.
While this is an excellent option for businesses in good standing with the IRS, it may not be a suitable option for businesses that are delinquent on any government debts or taxes.
Online Short-Term Loans
This type of loan is common for business owners to seek out after applying to conventional bank loans. These loans are typically offered on a shorter timeline of 6-18 months, though the interest rate can be high with some lenders. Fortunately, however, it’s easy to qualify for these loans.
This loan type is ideal to help cover large purchases, such as a new retail location your business is expanding into, or a pre-existing business to start your venture. In an emergency, these loans may be used for payroll or replacing necessary medical equipment as well, however, the high interest rate is a deterrent from that over a conventional bank loan.
These loans max out at a lower capital amount than conventional bank loans do, however, with max loan amounts ranging from $250,000 for short-term loans to $500,000 with medium-term loans.
It is critical that a veterinary clinic has reliable, working medical equipment to x-ray animals, provide a proper diagnosis, and perform surgical procedures if necessary. Depending on the size of the clinic and the typical species cared for, this equipment may become extensive and prohibitively expensive to replace if it malfunctions.
A business loan can help your practice replace costly equipment through equipment financing loans.
Ownership or Purchase Financing
Another common loan type is for purchasing a pre-existing veterinary practice with an established revenue source. This type of loan can be found either through veterinary clinic brokers, online lenders, or through conventional bank lending services.
The qualifications, terms, and max loan amounts may vary depending on the source.
Which Veterinary Business Loan is Right For You?
Depending on how you intend to use the business loan, you may find that one loan program works better for your business than another. Likewise, your business’ current level of income and projected profit over the loan term will influence what type of loan is ideal for your business.
Overall, the best veterinary loan for your clinic is one that provides your business with the quick injection of capital necessary to propel your business forward in the market and start making more money than previously projected. This may be in the form of new equipment, a new location, or even purchasing the business in the first place.
For help in choosing the right veterinary business loan for your needs, contact the veterinary practice brokers at BSF today through phone or email and let us know where your business is today, and where it needs to go tomorrow.
How to Get the Best Loan to Start Your Practice
To qualify for a loan that will help you start your practice, you may be required to apply for a business loan with your personal credit and assets, especially if there is no pre-existing business to project revenue from.
Raising your chances of approval is easy with the right steps. First, consider the type of loan that would best benefit your business and that you project you will be able to reasonably pay the loan amount back by the end of the term.
Next, consider your personal credit score and business plan. Some lenders may request a business plan if you haven’t established a business yet, and your credit score will help you determine eligibility.
Reviewing the lender’s eligibility requirements and ensuring that you and your business meet the basic requirements will help you get approved to the right loan program as well.
Qualifying for Veterinary Business Loans Despite High Student Debt
If you’re like many fresh veterinarians just out of school, you may be wondering if it’s possible to work for yourself and own your own practice, but this quickly becomes a daunting task with mounting student debt. (2)
“The Veterinary Loan Repayment Program will pay $75,000 to eligible vets who work for three years in areas where there are shortages of animal doctors.”
Fortunately, there are options available to new veterinarians who are willing to work in areas where these jobs are in demand.
Additionally, having high student debt on a personal level isn’t always a barrier to receiving a business loan, however, it is essential that you built positive credit and make loan payments on time to continue to demonstrate your ability to pay off the loan with as low of an interest rate as possible.
To get accepted into a loan program with pre-existing debts, it is important to note that you may be required to put up some other form of collateral.
How to Choose a Veterinary Loan Lender
Choosing a veterinary loan lender can be a difficult process for a business owner who has never received funding this way before. Fortunately, the process is fairly easy once you know what you’re looking for.
Ideally, you should also opt for a business that is SBA certified to ensure that they are familiar with small businesses and follow the regulations the SBA places on lending agencies.
Once you’ve identified a few lenders online or in your local area that are certified, you can look at their experience. Lenders with previous experience with veterinary clinics are more likely to approve loans as they understand the practice more intricately and have more accurate expectations for the industry-specific business.
While veterinary practice experience isn’t necessary, it is helpful. Overall, your lender should have a quality track record and a variety of loan programs to suit the different needs of your business in the future.
How Do You Finance a Veterinary Practice?
Financing a veterinary practice can be confusing, especially for business owners who have never had to finance a business before. Depending on the type of veterinary practice you own, your business may even be subject to additional checks before loan approval, making acquiring a new loan difficult, especially if you have any outstanding debts and need more financing assistance.
With the right help by your side, financing a veterinary practice doesn’t have to be difficult. It’s time to take the next step in your career by purchasing a new veterinary clinic, whether it’s your first or an expansion of a pre-existing business franchise.
Get in touch today to learn more about your options for veterinary business loans or ask questions for our veterinary clinic brokerage team about buying your first practice
- Forbes.com, 5 Tips for Getting One of the Best Small Business Loans
- Forbes.com, 5 Tips for Getting One of the Best Small Business Loans
- Huffpost.com, How You Can Pay Off Your Student Loans by Doing Good for the World
- Huffpost.com, How You Can Pay Off Your Student Loans by Doing Good for the World