Veterinary Practice Loans: Find Solutions To Meet Your Needs
The number of veterinary practice loans out there can be daunting when you are first buying your business or looking to sell an old practice.
Which one do you need, and what’s the difference between all these options?
From conventional bank loans to SBA financing loans, it can be difficult to sort through the paperwork and find the right loan for your business.
It’s time to prepare for your next step in owning the business with our help, whether you’re looking to buy a clinic, start your own, or grow a pre-existing practice. Get started with this comprehensive introductory guide to veterinary practice loans today before you start looking.
What is Veterinary Practice Financing?
The purpose of this type of veterinary practice loans is to provide your business with an influx of cash that enables you to make a large purchase. The purchase could be for any business-related equipment, covering payroll for staff during difficult financial times, or in acquiring a pre-existing clinic.
Commonly, veterinary practice loans are used for one of three purposes:
- Buying a pre-existing clinic from another owner
- Expanding, remodeling, or updating an established and owned practice
- Starting a new practice from the ground up
Ideally, the loan or financing program should allow you to pay for the purchase over time without digging into emergency finances or resources such as savings or additional credit.
Depending on the intended use, the lender may require that you have different qualifications. For example, if you are starting a new practice, you will not have previous revenue to show to the lender, so they will want to see a strong business plan that showcases exactly how you intend to run the business and how it is forecasted to make enough revenue above operating expenses to pay back the loan.
For lenders, it is most important that they minimize their risk when approving new business owners. If a loan defaults, they must resort to possessing the collateral listed, or sending the unpaid amount to collections, which is a lengthy and fruitless process for many lenders.
Veterinary Practice Loans: The Solution for Your Business
For almost all business owners, loans and financing is an essential aspect of creating or running a successful business. (1) It is unlikely that new business owners will have the cash on hand to outright purchase a veterinary practice, which can range into the millions based on the method of valuation and the location of the pre-existing practice.
Veterinary practice loans provide that initial influx of cash so that the seller is made whole, and the buyer can pay the loan back over time based on the terms of the program, ideally allowing them to pay back the cost of the purchase utilizing the revenue the business brings in.
Not having access to these fundamental resources can be a big burden in operating successfully, making ownership of the business much riskier for the owner themselves.
“For those who want to start a new business, startup capital is often a big obstacle. […] Fortunately, there are plenty of ways to craft smart business budgets and secure funding, and they can help you get started without a ton of capital.”
In the beginning, however, finding the right loan program and establishing a relationship with a new lender can be difficult, and your chances of approval for a program may be slim.
The brokers at BSF can help you find the right solutions for your business, helping you prepare ahead of time for the best chance at financing approval and connecting you with the right lenders for your business’ needs.
In a successful practice, you may find yourself with a desire to open a new practice. This provides a higher level of convenience to existing clients and allows you to acquire new clientele in another region.
Lenders often look at your primary location’s revenue and will require a strong business plan for the new location to qualify your business for the financing loan.
A startup can be difficult to acquire a new loan for as the lending does not have any previous revenue to assess the business’ health with and must make the qualification based on your personal income, debt, and credit score.
While it is possible to qualify for these loans, the lender takes on more risk than they would with a pre-existing business, so the APR is typically higher, with more restrictive terms.
When you are acquiring a new business, you will need to show the business’ financial statements to prove that the business is making enough to pay the loan.
If the business is not current making enough to repay the loan, you may also need to showcase a strong business plan to convince the lender of improvements that will allow the business. Your personal credit score and income may also be considered as a part of the process.
Expand Your Practice
If your practice is successful and needs to expand to meet the patient or clientele demands, or house equipment for a new service, then you may consider expanding your practice.
Construction costs for this type of renovation, however, can be costly and must be paid at once or in lump sums. To avoid harming your cash flow, the wise financial decision is often to find veterinary practice loans that will help you pay for this expansion.
Lenders may look at your current business financials and a forecast of additional revenue resulting from the expansion to qualify you for the loan.
How Do You Get a Vet Loan?
For many lenders, they don’t just look at qualifications, but they also consider whether they have a working relationship with the business owner, as they learn about each of their clients’ backgrounds and histories to make a more informed decision. (2) How you conduct yourself in the presence of a lender can say a great deal about your character and overall business risk.
Overall, the goal with working with a lender is to establish yourself as a professional who is reliable and trustworthy. Punctuality is important, as they need to know that you are serious about your business and able to pay loans off on time.
“The more [the lender] trust[s] you, the more likely you will be able to obtain a loan from them. Let him/her see that you are a serious customer who thoroughly investigates your options before making major decisions.”
Unfortunately, this isn’t the only criteria for securing a loan; these lenders must still ensure that you are financially eligible for the program applied for. These qualifications can change based on the lender, the specific program, as well as the type of business you own.
Overall, it is important to ensure that you have a good personal credit score, as this may be used in determining your reliability with the business. You must also be ready to provide the business’ financial statements if you have an established business.
If you are looking for financing for a business purchase, you may be required to provide financial documentation from the seller, while startups may be considered riskier and require collateral and a more thorough credit check.
One of the primary things that a lender will look at in assessing how fit you are to pay back the loan is the debt-to-income ratio. If you currently have a large amount of debt – for example, unpaid student debt from veterinary school – then that will hurt your chances of approval with most lenders.
This is especially important in the case where you do not have existing business revenue and are looking to start a business from the ground up, as the lender must rely entirely on your personal income and credit score.
Just because you have outstanding debt does not mean that you will not qualify. Most lenders look at the ratio of your cash flow to determine whether you can realistically afford the monthly payments to pay back the loan. For most lenders, their cutoff for the debt-to-income ratio is if you are spending more than 50% of your income on paying off other debts.
This includes combined debt from student loans, mortgages, vehicles, or medical expenses. There are ways around this obstacle, however, and additional steps to increase your chances of approval even with a higher-than-average debt to income ratio.
How Does a Vet Loan Work?
Veterinary practice loans are a type of business loan that can be applied to your practice. Whether you are purchasing a pre-existing business, already have an established business, or are looking to provide a cash influx to get a startup off the ground, a vet loan plays a critical role in ownership of a practice.
When purchasing a pre-existing business, the seller will provide financial statements of the business as a way for you to both confirm the valuation of the business and ensure that it is not priced unreasonably, as well as help you get financing for the purchase. The lender will look at how much revenue you make, as well as how much revenue the potential business makes as a part of the approval process. If they believe that you will be able to pay off the loan by the end of the term, then you will receive financing.
Applying for financing or a cash influx for an already established business under your ownership is relatively easy provided that your business has a good history of paying off previous loans, and that you can provide adequate reason for the loan, such as expanding the practice, covering payroll, or purchasing new equipment.
Startups don’t have previous revenue to show to a lender, so they are much riskier for the lender to accept. A strong business plan, a good credit score, and overall establishing a personal rapport with the lender can help your chances of approval for this type of loan.
Ready for Practice Ownership?
Before you take the leap into entrepreneurship, it’s important to first consider whether you are ready for practice ownership.
Owning a practice is much more complex than many people first assume; there is a layer of business savviness, or executive decision-making, and of practicality that must go into the role of an owner.
While professional help can provide useful advice, you are ultimately the decision-maker in charge, and each decision will either smother the business’ potential or help it thrive and grow.
For some people, that kind of pressure is too much to balance, and they would prefer to find employment within a practice rather than take on this responsibility.
Others, however, rise to that challenge and are excited to find solutions to the business’ problems and find great joy in seeing the improvements they can make.
Ownership also provides a level of control in the patients and clientele’s experience when they are in the office, helping provide a higher quality of care that you might not be able to from within the business.
Some owners split the difference by hiring in a management system to help take away the burden of some of those decisions, but ultimately, owners are responsible for the success or failure of the business in the end.
Professional Practice Advice Designed for Your Success
Do you need advice or help taking the next steps in your business?
Our brokers can help you find the right veterinary practice loans for your needs, no matter what stage of the business you are in.
Every successful business out there has had a team behind them to help advise and connect the dots. It is a group effort, where each person puts their expertise to use. At BSF, we are here to help you find success, whether it’s connecting the dots between buyers and sellers, or helping you find the right loan programs for your business.
Give us a call today or send an email to get in touch. We’re looking forward to learning about your goals.
- Forbes.com, Six Tips for Financing a New Business with Limited Capital
- Huffpost.com, Procuring Business Financing 101
- Forbes.com, Six Tips for Financing a New Business with Limited Capital