If you are a veterinarian considering buying an existing practice, expanding your current practice, or starting up a new practice, you may need financing to help you achieve your goals. Understanding the intricacies of financing options can be difficult, but we have some helpful information to make your financing journey a little easier.

Veterinary practices in 2022

Let’s take a quick look at what veterinary practice ownership looks like in 2022. According to IBISWorld, there were about 59,000 veterinary practices in the U.S. as of June 2022.

That number is expected to increase as pet ownership continues to rise. Between 2016 and 2020, dog ownership alone increased 7 percent from 76.8 million to 83.7 million dogs.

According to the Bureau of Labor Statistics, veterinarian employment is projected to grow 19 percent from 2021 to 2031, with about 4,800 job openings every year. This means the number of veterinary practices may increase significantly, and you could be one of them!

Veterinary practice loan options

If this is your first time considering practice ownership, veterinary practice loans are likely new territory for you. Understanding your options will better prepare you to make the right decision for you and your business.

As you begin to research your options, it’s important to understand that not all lenders have a program catered specifically to veterinarians. When talking to lenders, ask them any of these questions to ensure you are working with a lender that understands the business of veterinary medicine:

• Do you have a program specific to veterinary practice financing?
• How do loan options for veterinarians compare to other industries?
• What program guidelines make financing a veterinarian practice unique for that lender?

Common veterinary practice loan options include:

• Conventional loans
• SBA loans
• Equipment financing
• If real estate is also involved with the practice, commercial real estate loans

Conventional loans for veterinarians

Conventional loans can be the least expensive option for potential veterinary practice owners. Because conventional loans are in-house portfolio loans, lenders typically offer lower interest rates, more flexibility with underwriting, and fewer fees.

Even further, specialty practice lenders, like Panacea Financial, offer loans designed specifically for the needs of veterinarians when they are ready to finance something for their private practice. This typically means up to 100% financing, longer fixed rates and better overall terms when compared to non-specialty lenders.

At Panacea, we offer vet-specific loan programs with a streamlined application catered to the industry, quick decision making, and a 24/7 Concierge Desk with real people ready to answer any question — all to make your financing journey simpler.

SBA loans for veterinarians

SBA loans are disbursed by banks but backed by the U.S. Small Business Administration. These loans may be easier for borrowers to obtain, especially those who may have trouble getting approved for conventional loans due to less favorable credit and other factors, because banks take on less risk due to the government backing.

But there may be a tradeoff that you should be aware of when using this program. SBA loans may have a better chance of approval, however the loan process is far from easy. These loans typically require a down payment, required fees to fund the program, a lengthy application, and lots of documentation.

This process can take weeks to complete and could delay your practice acquisition, startup or other financing needs. Additionally, the fees, down payment and other particulars of these loans could be avoided if you went down the conventional path.

Equipment financing

Veterinary equipment loans are important when it comes time to replace or update the equipment needed to treat your patients. This type of veterinary loan uses the equipment as collateral, which can make the loans easier to acquire.

Veterinarian loans for equipment are generally very simple to acquire because they can only be used for specific equipment.

Commercial real estate loans

During an acquisition, expansion or even a startup, you may need to purchase the real estate of the existing practice or to build on. This is where commercial real estate loans come in. There are several different options that you can choose for this type of financing — SBA loans included.

Just like we’ve already covered here, there are often more benefits to going conventional over SBA. Plus, a veterinary-specific lender may have an even better program. It’s important to ask questions to any lender on how this program is unique to veterinarians’ financing requests.

Choosing the lender for your veterinarian practice loan

When searching for the right practice loan for your needs, you should compare the offerings of different lenders and banks. We have a full article that breaks down tips for wisely choosing your banking partner — Finding a Practice Lender & Bank. We are sharing the highlights of that article here:

Terms and rates

When choosing a lender for a veterinary practice loan, many look only at the rate offered. Though rate is very important, other factors can make a big difference in the total balance you will have to repay. Term is one of those.

The shorter the term of the loan, the less rate becomes a factor, because you are amortizing the principal balance much more quickly. Taking a slightly higher monthly rate, but getting yourself into a better overall program could be a smarter financial decision in the long run.

Structure and loan programs

A structure of a loan refers to the parameters or details of your loan: fees, amortization, fixed rate period, amount being approved and covenants are some examples of what should be considered. This is directly related to the loan program being offered by the lender and if it’s catered to the needs of a veterinarian.

How your loan is structured and the details of the program are extremely important. For example, if a lender has you approved for an SBA loan at a specific rate, but another lender has you approved for a conventional loan at a slightly higher rate, the structure of the conventional loan may be superior even at the higher rate because of the loan details and other factors mentioned above.

Make sure you understand the loan program options and structures from each lender you are working with. Not having a down payment, less fees and longer fixed rates are all factors that affect your loan.

Servicing

A lender’s servicing may save you time and improve efficiency. Be sure you know:

• Does the lender charge for or limit deposits or items?
• Does the lender charge for additional equipment needed to bank with them or allow remote deposits?
• What additional services will you get or be charged for if you need them?
  • ACHs (automated clearing house network) – Think of this like Venmo for your business. You will use this product weekly, but there are fees for these transactions with some banks.
  • Wire transfers – How freely and efficiently will you move money if you need to pay vendors or yourself? Some banks attach fees or limits to these transactions which can hinder your workflow.

How you are serviced, how unexpected needs are dealt with, and ease of contact are important. Time is money — you will have an issue at some point, but knowing your lending partner is ready to help you with those issues is extremely valuable.

Merchant services

An essential part of owning a practice is accepting any form of payment from your patients, including credit cards. This is known as credit card processing or merchant services.

These services are often accompanied by fees that are not always transparent. Some lenders draw customers in with low rates on loans but require the use of their merchant services. Through high fees, these lenders can easily make up for the lower rate, preventing you from reaping the benefits of that low rate.

Future support

Consider how a practice lender will support you with future loans. Look ahead before you make a decision to ensure you don’t pick a lender that can’t support your practice with future needs. You may want to assess whether the lender offers:

• Real estate programs
• Construction/expansion loans
• Equipment loans

Obtaining your veterinarian loan

Practice ownership may be daunting and learning the ins and outs of veterinary financing can appear complicated, but it can be a life-changing and exciting step in your career. If you are ready to make that step, we are here to support you.

If you need help finding business brokers, CPAs and other advisors to help you start your practice, our Build Your Team program can get you connected with trusted industry experts for free! Visit our page to learn more!

If you are looking for the right loan for your veterinary practice, we are here to help. To learn more about our financial options, visit our Panacea Practice Solutions page.