Loans for Veterinarians: 6 Ways to Finance Your Veterinary Practice
If you’re a veterinarian looking to open a practice, you need to understand ways to get funding, as well as how to make give Fido his annual rabies shot. Whether you’re looking to open a new veterinary clinic, expand to a second site animal hospital or simply buy an existing practice, you may need funding to purchase real estate, finance renovations or purchase medical equipment. We’ll walk you through those loans for veterinarians and how to find the best one for you and your practice.
Six options to finance your veterinary practice
1. Bank loan
Many banks have specific programs for veterinary practices including large traditional banks like Bank of America with branches around the country.
Keep in mind that traditional bank loans for veterinarians can be difficult to obtain, especially for startup business owners. Community banks are often more likely to take a chance on business owners in their own backyards.
2. SBA loan
The SBA isn’t a direct lender — instead, it guarantees loans. Two popular SBA loan programs include the 7(a) and 504 loan programs. The difference is what you are financing, the length of the loan and how much equity the loan requires.
3. Business line of credit
Depending on why you need the money, a business line of credit may meet your requirements. Most banks and online lenders, offer these types of flexible forms of funding. An advantage to a line of credit is that you typically only make payments after you actually borrow money.
4. Equipment loan
Some lenders have loans specifically intended to purchase new equipment. The equipment you buy serves as collateral for the loan, which means lending requirements might be more lenient than other types of loans. Equipment loans are available from both brick-and-mortar banks and from online lenders. The advantage of the latter is that you might get the money you need faster.
5. Business credit cards
For small purchases of equipment or supplies, having a credit card in the name of your business can be a quick and easy to finance what you need over the short term.
6. Seller financing
Some sellers of an existing veterinary practice may be willing to finance some or all of the purchase price at an attractive interest rate. However, you should be aware that seller financing may be unlikely due to the risk the seller would be taking on you, the buyer, to keep up payments, perhaps over an extended amount of time. An alternative might be to buy the existing owner’s practice outright, using one of the funding sources discussed earlier, or a hybrid of the two with an upfront lump sum plus monthly payments for a set amount of time.
Ways to start a veterinary practice business
When deciding to start your own veterinary practice, you have three main business options to consider:
Associate veterinarians may be offered partial ownership in the practice where they’ve been working since graduation. An alternative is to join another practice as a partner.
Start from scratch
Starting a brand new business may be the most difficult — and expensive — path of the three. You’d have to rent storefront space, buy equipment such as X-ray machines and lab equipment, and hire staff. The advantage would be creating a new business, and possibly sole ownership without sharing profits with partners.
Buy an existing practice
Buying an existing practice may be the simplest way to enter the business. You may start with a physical location, staff and existing equipment, although there could be costs involved if the equipment needs updating. Buying an existing business comes with its own upfront costs, but there are financing options to help.
Challenges for new veterinarians
Veterinary school may teach you about a cat’s nine lives, but students in veterinary school typically don’t receive much training they need on how to operate a successful small business or manage business finances. Here are some helpful tips for veterinarians opening a new practice to keep their new business financially healthy.
- Don’t borrow more than you can afford. To repurpose a well-known phrase, borrow with your head, not over. In deciding how much you can afford to borrow, sit down with the loan representative and find out what the monthly payment is likely to be and compare it with the expected income and expenses. Successful practices see about $500,000 in annual revenue per full-time doctor in the practice.
- Make sure your budget includes expenses for you and your family. While your work as a veterinarian is based on your love of animals, it is also a job. That means the budget for your new practice must include a reasonable wage for yourself. Take into consideration the income your family requires for food, clothes, transportation, shelter and other needs, including saving for retirement.
- Understand the impact of student loans. The amount you can borrow is based on a number of factors, including the income the business generates. It’s also based on your credit rating and other business and personal debt you may have, including student loans. Lenders may look at your personal credit, cash reserves you may have, collateral and expected business cash flow or existing cash flow in the case of an established practice
- Be specific. Loan terms vary based on how the money you borrow will be used. Different rates and terms will be available for funding new equipment versus buying and improving real estate. Your lender will need to know exactly what you are doing with the money you borrow and will offer the best terms it can under those circumstances.
Costs to consider
Like any small business, there will be fixed costs such as rent, but there are other expenses to keep in mind with a veterinary practice including:
Cost of goods sold — Pet treats and toys, food and preventative medicines are all items that you may stock in your practice. This inventory can be an expense that you may not recoup right away. One rule of thumb: Your weekly inventory order should not exceed more than 12% to 14% of the previous week’s gross revenue from the previous week. Consider linking your practice website to a third-party prescription site so you don’t have to carry those medicines on-site.
Staffing costs — You may need staff members to make appointments, greet patients and attract new ones. Well-managed practices spend about 21% of gross revenue on non-doctor staff wages.
Practice management costs — Veterinary practices may want to consider an accountant and other consultants who specialize in the industry, but these may be more expensive than, say, a general certified public accountant.
Resources for veterinarians
Dailey said veterinarians have a unique skill set, but not necessarily one that includes much business experience. Here are several resources for veterinarians interested in starting or expanding a practice:
American Animal Hospital Association (AAHA) — The American Animal Hospital Association also provides financial planning tips and tools.
American Veterinary Medical Association (AVMA) — You can find more tips as well as information on the AVMA’s annual economic summit here.
Vet Partners — Vet Partners’ membership is made up of consultants who specialize in providing everything from IT services to marketing advice to veterinarians and their practices. These consultants could help you set fees, handle your financial statements and review your overall financial health.
Veterinary Hospital Managers Association (VHMA) — Aimed at veterinarians as well as administrators, office managers and consultants, VHMA provides education, certification and networking opportunities to those who run veterinary hospitals and clinics.