SBA Veterinary Clinic Loans: Complete Guide

Veterinary Practice Financing

Holly Manske works with veterinarians who want to buy, sell or finance a veterinary practice. If you are seeking a veterinary practice loan, you need an experienced banker with a long track record of success. Up to 95% financing available.

Take the next step in your veterinary career. Call Holly for more details on how BSF can help you succeed today.

The most successful funeral home transitions happen with clear communication between all parties involved. A confidential, organized and efficient transaction process. A process where the buyer and seller work together to transition the business in a way that ensures no disruptions in service

-Matt Manske

In this guide, you’ll learn about what the SBA does and the types of loans they can provide to help your practice thrive, whether you’re looking to purchase a clinic, update an existing location, or expand into a multi-practice venture.

The world of veterinary clinic loans can be difficult to navigate alone, but we can help you find the right loan at no additional fee. Call or email today to learn more about this service.

What is the Small Business Administration (SBA)?

The small business administration is a sect of the US government that helps support small businesses and entrepreneur by offering loan solutions on a scale that makes sense for the individual, or businesses that are classified as small businesses.

According to the IRS, a small business is an entity that has fewer than 50 employees under its employment. These employees include anyone taking salary, so owner-employees will also count within this figure if you take a salary for working within the business.

Created and established in the ‘50s, the SBA is dedicated to allowing business owners to ‘pursue the American dream’ according to their mission statement.

While the SBA offers grants, loan programs and payroll support, they also provide consultations for small business owners who may need guidance and support.

Not every business qualifies just because they are a small business, however; businesses must still fall within their approval criteria to be considered for loans from the SBA like any other lender.

What Are SBA 7(a) Veterinary Clinic Loans?

The 7(a) loan is dedicated to helping small businesses achieve the next step in their goals by providing financial assistance. This type of loan is not specific to veterinary clinics and may be used by any industry, but it can be used for a variety of purposes, making it the SBA’s most common loan program.

The 7(a) loan can help provide businesses with short or long-term capital injections, refinancing a business’ current debt, purchasing equipment and supplies. The best use for this type of loan, however, is in purchasing real estate, or when real estate is a part of the business’ property and therefore sold with the business.

The SBA 7(a) loan does have a maximum, and small businesses must meet the qualification requirements to become eligible for the program. The maximum loan amount is $5-million which must be paid back by the payment term.

Not every business will qualify, and when purchasing a pre-existing business, you must show its financial documentation – among other paperwork – for the previous three years’ worth of business. It is not an ideal loan program for startup businesses.

What Practices Qualify for SBA 7(a) Loans?

It is true that only certain practices qualify for the SBA 7(a) loan. To qualify, you must run the business for profit; fortunately, most veterinary clinics operate as for-profit businesses.

You must also be considered a small business, as defined by the SBA. There are multiple factors that the SBA takes into consideration when determining if you business is small, however, it is typically considered in the amount of annual income and employee size.

As an owner or loan applicant, you must personally have reasonable invested equity; the amount of ‘reasonable’ equity may be subject to debate, but typically this is 50% or more.

As a general check, you or the business must not have any other form of debt to the government, and must use the funds for sound business purpose, which the SBA will determine upon application.

Your business must be engaged in – or propose to do business within – the United States and able to demonstrate significant need for a loan. Documentation of how the funds are used and why you need the loan in the first place are critical aspects of qualifying for this loan type.

Finally, you must show that you have applied to alternative financial resources – including the use of personal assets – before seeking financial assistance. Seeking SBA support as a first-resort is often considered one of the main causes of SBA loan rejections.

The Process for Applying for Veterinary Clinic Loans

Finding the right loan can be difficult, especially when you factor in qualification requirements for a business you might not own yet, or have not owned for long enough to show three years’ worth of revenue. (1) Fortunately, any business can apply for loans, and depending on the loan program and lender, qualification is easier than ever as new programs open up to small businesses.

Understanding the process, however, is a critical part of qualifying for the loan program you need to take the next step in your business.

“Before you can get financing for your business, you need to choose the right type of business loan. Factors like your qualification requirements, loan purpose and desired loan terms can all influence the type of business loan that’s best for you.

– Forbes

Before you enter into a loan agreement, you must first prepare yourself and your business for the best chance at success. Consolidating and paying off debt, raising your personal credit score, and establishing a strong business plan will all help you with the application process.

Then, once the application is in, speaking with the lender will help customize the underwriting process. Once the loan is approved and t he terms accepted, you will have a specified timeline to pay back the loan.

Talk to Veterinary Practice Loan Experts

Are you ready to talk to someone about your lender options? The team at BSF works as veterinary practice brokers, helping you buy and sell veterinary clinics with no additional fees.

In addition to making these connections, we help you find the loan programs that are right for your business, allowing you to take the next step with your business.

The loan experts at BSF will help connect you with lenders suited to your business’ current state, helping you find loan programs that provide you with the best chance at success.

Give us a call today or send an email and let us know how we can help you.

Veterinary Practice Loan Rates

Veterinary practices are becoming more popular as family-owned or veterinarian-owned entities thanks to the small business assistance provided by lenders in recent years. (2)

“With so many small businesses coming to life or gaining more traction each year, it’s not surprising that obtaining a small business loan can be competitive.”

– Huffpost.com

Still, the rates of most lenders can feel prohibitive, putting new practice owners in a tight financial spot when faced with repaying the loan under a failing business.

Most veterinary clinic loans maintain a consistent APR, though providing more collateral can help lower this rate depending on the lender and loan program. Most rates sit between 5% and 35%, leaving business owners with a difficult choice in shopping around for the best rate. If you need help finding the right loan program for your needs, give the team at BSF a call today.

Can You Refinance an SBA Loan?

It is important to understand before you take out a loan with the SBA that refinancing with this lender is not an easy task to accomplish. There are several rules set forth by the SBA governing your ability to refinance.

While these terms are subject to change, refinancing debt with the SBA is possible under a certain set of circumstances requiring extensive documentation of the process from the very start of the debt; refinancing existing loans utilizing another SBA loan is not typically allowed.

For more information on SBA loans, it is recommended that you speak with an SBA representative regarding your individual circumstances, as the SBA is explicit in what they do and do not allow with little flexibility. Debt consolidation loans may be an option for businesses with multiple sources of debt.

How Do You Finance a Veterinary Clinic?

You can finance a veterinary clinic several different ways; if one loan program doesn’t work out, then try again with another. No matter the type of lender you choose, it is best to understand their motivation:

  • To reduce their risk of losing money
  • To make a profit on the interest over the whole term of the loan

Understanding these two factors will change how you approach lenders, and how you position yourself as an applicant.

The three primary sources of financing loans comes from conventional lenders, private lenders, or from the SBA:

Conventional Loans

Conventional loans are the most popular way to finance a veterinary clinic purchase, as it provides the security of a traditional lender structure.

These banking solutions are often governed by a rigid set of qualifications that their underwriters will accept, so while you may be working directly with a lender, they have little flexibility in what they can offer. Still, developing rapport with an individual lender may make them more inclined to find out how far they can stretch their flexibility should you be interested in negotiating terms.

Private Lenders

As an alternative source of financing, you can opt for a private lender. While these lenders are often easier to get approved for as they have lower qualification standards and have some flexibility in what they can offer, this type of loan can also be difficult to pay back, as interest rates are higher than conventional bank loans.

Private lenders are easy to find online and may offer a variety of options when dealing with debt repayment, allowing you to put alternative sources of collateral up that a conventional lender may not accept.

SBA Loan

The Small Business Administration offers financing loans that can help you grow your business, though they are typically much more stringent in what they will allow and require more detailed accounting methods when tracking how the loan is used. This type of loan is best applied for with professional assistance as you may need help in preparing the right paperwork and setting up payment plans.

Can You Use a Loan to Start or Buy Your Clinic?

Yes, you can use a loan to start or buy your clinic. It is important to note that there are additional qualification steps for startups, while you will need the business’ previous financial information when buying a pre-existing practice.

In both cases, you will need a strong business plan drafted with the help of an accountant and attorney to provide a convincing case that you will take the business in a positive direction that will improve its current revenue standing; startups generally require a stronger business plan than business purchases, as no current revenue is available to help you pay off the debt.

Utilizing a loan to help you purchase or start a practice may also require you to put up some of your personal assets for collateral as well, as the lender must ensure that they will not lose the value of the loan if it defaults. Once you pay the loan off, however, all liens are removed from these properties and you reclaim full ownership of the collateral.

Should you default on a loan, this collateral may be repossessed to help pay the balance of the loan, however, so it is important to make careful, well-reasoned decisions in confidence when taking out loans. Applying to loans with longer pay-back terms and lower interest rates may also help you lower your personal risk.

What is the Profit Margin on a Veterinary Practice?

Depending on the size of your veterinary practice as well as the competition and current pet owner population, you may see a different profit margin than others. The profit margin is considered as what the business made above all operating expenses. This does not factor in any unrealized expenses such as tax duties or debt obligations.

For a small, generalized veterinary practice, operating costs can be kept low and profit margins typically range between 10% and 15% of the total cost.

Specialized services are often able to charge more, especially as they deal more with insurance companies and require more skilled employees to properly accommodate those services. Whether it is an emergency clinic or a hospital for larger animals, these specialized clinics can often reach a 15-25% profit margin on average.

Then why would anyone open a generalized clinic?

Specialized clinics are often difficult to sustain and the startup costs are higher. Provided there is sufficient demand for it and skilled labor to employ, a specialized clinic can establish itself easily within a community.

Generalized clinics, however, offer the basic suite of services expected by a family vet practice, with lower startup costs and a larger pool of clientele to draw from.

Need Help Finding the Right Loan for Your Veterinary Practice?

Finding the right loan for your business can be difficult, no matter what stage of ownership you are in. Whether you are looking to provide an influx of cash for a pre-existing practice, or purchase a new veterinary clinic, loans are an essential part of owning the business.

If you need help finding the right loan program, you’re not alone. New and established business owners alike often struggle to get approved for ideal programs that provide the capital necessary.

Talk to the veterinary brokers at BSF today to learn more about lenders that match your needs; let us help you take the next step with your business.