Practice Financing: Long-Term Financing

What You Need to Know About Practice Financing

The veterinary community is an evolving yet thriving industry with many opportunities as well as some challenges. Among the challenges practice owners often face is financing. Bankers want to lend money to good businesses; veterinary practices are good businesses.

Practice owners seeking to fund a specific project, such as a business or real estate acquisition, expansion, remodeling, or large equipment purchase should utilize long-term financing or a term loan. Financing a project over the proper term is important. A project should be accretive, or create additional value to the business, while providing sufficient cash flow to service the debt incurred and an additional return to the owner.

Short-term financing, such as lines of credit, should be reserved to shore up working capital and pay expenses during irregular cash flow cycles.

Seek loans with longer loan terms and no balloons. Balloon is a term used to describe when a loan does not fully amortize over its term. This means a large single payment is required at the end of the term to repay the remaining principle balance of the loan.

For example, for a loan with a 10-year amortization and a five-year term, the loan will balloon in five years, requiring the remaining five years of principle to be repaid at the end of the term or refinanced. A loan with a balloon leaves the borrower to risk higher interest rates when the term ends. Furthermore, the borrower will have to repeat the loan process to refinance the remaining loan amount. A loan without a balloon have an amortization and term of the same length.

What is Cash Flow?

Many factors will affect the strength and success of your funeral home, including the financial decisions you make for your business. As a business owner, you want to look for ways to improve the business financially. Are there ways to cut expenses? In what ways can you better serve your customers while also improve profits? If you’ve asked these questions, then you may have been looking to improve your cash flow. In this series, we will explain what cash flow is, why it is important, and how to analyze it easily; then we will review ways you can improve your funeral home’s cash flow.

What is Cash Flow?

In its simplest definition, cash flow is the difference between revenues (or sales) and expenses that a business incurs in any given period. If there is more cash coming in from revenues than going out from expenses, the cash flow is positive. Conversely, if expenses are higher than revenues, the cash flow is negative.

Net Income and Cash Flow are often thought of as the same. However, net income often includes ‘non-cash’ expenses such as depreciation and amortization. To calculate your net cash flow, you should take the net income per your profit & loss statement, and add back any depreciation and amortization.

Terry Campbell to Lead Live Oak Bank’s Self-Storage Lending Division

Live Oak Bank is pleased to announce Terry Campbell as leader of its new division offering financing to the Self-Storage industry. Terry joins the Bank with over 20 years experience in the industry. He is the former VP of Sales and Marketing and EVP of Operations for a leading Self-Storage building manufacturer.

Live Oak assembled a team of lenders and industry experts to address the need for financing to the Self- Storage industry in all fifty states. The Bank offers financing for new construction, real estate purchases, expansion of existing facilities, refinancing of current debt, and renovation.

The Self-Storage industry has faced certain limitations with existing financing including five and ten year balloons and conservative guidelines in their approach to credit. Live Oak plans to fill a financing gap for those established in the industry that have strong cash flow, but lack appropriate collateral to secure loans with conventional lenders.

“Self-Storage has been one of the fastest growing segments of the commercial real estate industry for almost 40 years,” said Kay Anderson, General Manager of Emerging Markets at Live Oak Bank. “With Terry leading the charge we will focus on strategic partnerships and educating the industry on our lending programs to achieve success in this market,” she stated.

“I’m thrilled to join the team at Live Oak, a Bank that truly understands the need for financing in this space,” said Terry Campbell, Domain Expert of the Self-Storage Division at Live Oak Bank. “Over the last 20 years, I’ve seen the growing need for a nationwide lending product for owners and operators in the industry. Live Oak’s loan structure, cash flow credit orientation, speed and service differentiate us from other lenders in the space, and position us to meet that demand.”

The Live Oak team has extensive lending experience and industry knowledge, enabling them to structure loans designed to meet the unique opportunities facing the Self-Storage industry. Live Oak is designated as a preferred lender by the Small Business Administration (SBA). This designation allows the bank to make loan decisions at a more efficient and faster pace, leading to quicker access to the necessary funding. Like all of their industry commitments, Live Oak Bank is invested in becoming a leader in financing this space.

Read more at Inside Self-Storage

Mark Milton Joins Live Oak Bank

Live Oak Bank is proud to announce Mark Milton as the new General Manager of the Funeral Home Lending division. Milton joins the Bank with over 25 years experience in the Financial Services Industry. Most recently, Milton served as Executive Vice President and Director of Institutional Services at Regions Bank where he was responsible for over $38 billion in assets.

As part of this transition, Live Oak has promoted Stephanie Dunn to the Emerging Markets division as the Director of Channel Partner Relationships. In this new strategic role, Dunn will be instrumental in developing the Bank’s growth in new markets.

“We have built significant relationships in the Funeral Industry, and I am excited to see Live Oak continue to grow with Mark leading the charge,” stated Dunn. “I enjoyed my time in Funeral Home Lending and am excited to help the bank grow in new directions. This opportunity allows me to contribute to the lending strategy at the Bank, working to define future industry direction with our executive team.”

With extensive knowledge in the Funeral space, Milton has been instrumental in the growth of funeral trust and asset management, as well as leading merger and acquisition strategies. Prior to Regions, Milton worked at Hibernia National Bank (now Capital One) and Ameritrust (now J.P. Morgan).

“Live Oak Bank is a finance leader in the industry,” commented Milton. “I am eager to join a high performing team and continue this success. By strengthening our industry relationships, expanding our offerings to Funeral business professionals, and serving the needs of our customers, we will be poised for continued growth.”

Live Oak was founded to provide small business loans to professionals across the country looking to start or expand their businesses. Aside from acquisitions and refinancing, Live Oak’s lenders specialize in real estate loans and ground-up construction projects. The bank initially began lending to veterinarians, and has since expanded not only into other healthcare-related industries, but into specialty areas as well. Having a keen industry focus and trade specialists on board, enables the Bank to offer an exceptional level of service to the client.  To learn more about Live Oak, please visit

Succession Financing | Webinar

Succession Financing: What’s Required for a Successful Transition

With the baby boomer generation approaching retirement, more and more funeral home owners are preparing to transfer their businesses to new leadership. This creates tremendous opportunity for the younger generation to become business owners, but proper planning is necessary for a smooth transition. It is imperative for both current and future owners to know what is involved in planning a succession as well as the financing options available.

Thank you Kates-Boylston for hosting the webinar!


US Beverage Industry Expo Appoints Live Oak Bank Executive as Advisory Board Chair

Healdsburg, Ca, Feb. 25, 2015—Wine Industry Network today announced that Jeff Clark, General Manager of Live Oak Bank’s Wine and Craft Beverage Group, a dedicated lending team for breweries, wineries, vineyards, and distilleries, will chair the US Beverage Industry Expo Advisory Board. This group of beverage industry leaders will provide expertise and guidance in the creation of the inaugural trade show and conference taking place February 16-18, 2016 at the Wardman Park Marriott in Washington DC.

“The wine and craft beverage factions have very interesting dynamics, particularly at this point in time. Their synergies are complimentary and possess unlimited possibilities,” says Clark. “The opportunity to help shape an event that brings these groups together, in a unifying city like DC, creates great potential for the beverage industry as a whole.”

The US Beverage Industry Expo will focus on the Wine, Craft Beer, Cider, and Spirits industries and will feature products and services from 300 of the industry’s best suppliers. An educational conference with sessions focusing on all aspects of the alcoholic beverage business will provide attendees with knowledge from proven winners.

“The businesses of beer, cider, spirits, and wine have more commonalities than differences. Issues ranging from sales, marketing, packaging, distributor management, government, and compliance are shared between these beverage categories,” said George Christie, President of Wine Industry Network. “We want to offer these groups an opportunity to come together once a year in Washington DC, to share learnings and best practices, and to present a unified front regarding the government regulations that impact us all. It just makes sense and is worth exploring.

About the Wine Industry Network (WIN):

Based in Healdsburg, California, is the wine industry’s most comprehensive business resource websites operating as an on-line trade show and created specifically to help industry professionals locate and connect more easily with the industry’s best suppliers and service professionals. WIN also produces The North Coast Wine Industry Expo, based in Santa Rosa, California, and the online industry publication, the Wine Industry Advisor (

Common Terms Used in Funeral Home Lending

Buying, Selling, Renovating, or Refinancing?
Terms to know when meeting with your lender.

When it comes to financing your funeral home, several questions will arise. What type of loan suits my needs? What questions should I ask my lender? What should I be prepared to tell my lender?

Jargon used by lenders is not typically used in your daily work. This can make the loan application process tedious and intimating. On the other hand, terminology of a funeral home business may not be familiar to every banker! Working with a lender who understands business financing and the funeral industry can facilitate the process.

Familiarizing yourself with the following terms will help you prepare for conversations with your lender.

Loan Term

The period of time over which the loan is to be repaid.

Loan Amortization

The period of time over which the loan payments are calculated. A loan’s payments may be calculated over a period that is longer than the loan’s term.

Balloon Payment

A large single payment required at the end of the term to repay the remaining principle balance of the loan.

A loan with a ten year amortization and a five year term will balloon in five years, requiring a.) the remaining five years of principle to be repaid at the end of the term or b.) the loan to be refinanced. A loan with a balloon leaves the borrower at risk for higher interest rates when the term ends. Furthermore, the borrower will have to repeat the loan process to refinance the remaining loan amount.


Expenses assigned to cash flow to normalize a profit and loss statement. Normal add-backs include interest, taxes, depreciation, amortization, one-time expenses, personal expenses, and adjustments to owner’s compensation.

Add-backs enable a lender and buyer to have a better understanding of profits and losses since certain expenses will not continue under new ownership. Only documented expenses will be added back to cash flow, so is vital that sellers keep accurate records of such expenses.


Earnings Before Interest Taxes Depreciation and Amortization; commonly used for valuation purposes.

Net Operating Income (NOI)

The funeral business’s income after Cost of Goods Sold (COGS) and other operating expenses are deducted from revenues, but before income taxes and interest are deducted. NOI is often referred to as cash flow and includes EBITDA + add-backs + owner’s compensation.

Operating expenses may include utilities, lawn care/snow shoveling, advertising, accounting expenses, and supplies but exclude wages for full time employees, purchase of a vehicle or other equipment.

Net Operating Margin (NOM)

A measurement of profitability (NOI/ Revenue) and an indicator of how well a business controls its costs. A typical NOM for a high performing funeral home is approximately 26%.

Debt Service Coverage Ratio (DSCR)

Cash available to service debt (NOI) divided by the total debt service for all interest, principle, and lease payments (NOI/total debt service). For example, a DSCR of 1.50 indicates there is 50% more income than is required to repay all debt, or $1.50 available to pay each $1.00 of debt. Conversely, a DSCR of 0.90 would indicate there is only 90 cents available to pay each $1.00 of debt.


An individual who pledges to repay the debt if the actual borrower defaults or is unable to repay the loan amount.


Ownership in assets after all debts are paid off. Equity is an important element in developing expansion and acquisition plans.


Leverage refers to the amount of debt used to finance a business’s assets. A funeral home with more debt than equity is considered highly leveraged and therefore more susceptible to default should there be an adverse change in circumstances. For example, if a funeral home is highly leveraged and experiences a year of low death rate, it could become difficult for the funeral home to pay its bills.


Intangible assets such as the company’s reputable name, customer loyalty, and good employee relationships, also known as “blue sky.” While goodwill can be difficult to price, it undoubtedly adds to a company’s value.

Understanding the terminology lenders use will help you prepare to obtain financing. Whether you are looking to renovate your current location, refinance existing debt or buy or sell a funeral business, educate your lender about your unique situation and needs and build a team focused on your long term success!


Originally printed in NFDA‘s the Director. Posted with permission. Download the article here.

Announcing Our Partnership with Bowling Proprietors’ Association of America (BPAA)

Live Oak Bank is pleased to announce today its partnership with the Bowling Proprietors’ Association of America (BPAA). As part of the BPAA’s “Smart Buy” program, member centers will now have access to financing options specifically addressing the needs of the Bowling and Entertainment industry.

“Live Oak Bank is thrilled to be selected by the BPAA as a trusted partner,” said Ben Jones, Domain Specialist for the Bank’s Entertainment Center division. “Like the BPAA, Live Oak is committed to this industry, offering financing for a sector that is sometimes overlooked. “

“We are excited that Live Oak Bank has joined our exclusive Smart Buy program,” Tom Martino, BPAA President stated. “Our program is very selective, and adding a partner like Live Oak who is equally invested in the betterment of BPAA members is a great step towards growing this industry.”

Live Oak Bank offers financing solutions to family entertainment centers, bowling centers, roller skating centers, small parks and water parks nationwide. The Live Oak team has extensive lending experience and industry knowledge and can assist Bowling and Entertainment Centers with construction, refinance, expansion, and remodel and working capital loans.

About BPAA

Founded in 1932, the mission of Bowling Proprietors’ Association of America (BPAA) is to enhance the profitability of all of its members. Headquartered in Arlington, Texas at the International Bowling Campus, the BPAA provides it’s over 3,500 member centers with group purchasing programs, business and educational seminars, legislative representation and proactively promotes the association and bowling industry. For additional information, please visit or call 1-800-343-1329.

5 C’s of Credit | Funeral Home Lending

The changing face of the funeral industry presents both opportunities and challenges to funeral home owners. With cremation rates continuing to rise, funeral home owners are adjusting their typical business models. With aging funeral home owners passing down their businesses, there is a change in ownership to the younger generation. These changes often require financing, whether there is a need to refinance existing debt, acquire another funeral business, finance a succession, expand or remodel.

Regardless of the type of financing needed, a bank or lending institution will be interested in both your business and personal financials. To determine the risk associated with making a loan, a lender will perform a credit analysis.

Credit analysis is governed by the “5 Cs:” credit, character, capacity, collateral, and condition.

• Capacity (Cash flow): The lender wants to know that your business is able to repay the loan. The business should have sufficient cash flow to support its business expenses and debts comfortably while also providing principals’ salaries sufficient to support personal expenses and debts. Examining the payment history of current loans and expenses is an indicator of the borrower’s reliability to make loan payments.

• Capital: Your lender will ask what personal investment you plan to make in the business. Not only does injecting capital decrease the chance of default, but contributing personal assets also indicates that you are willing to take a personal risk for the sake of your business; it shows that you have ‘skin in the game.’

• Character: Lenders need to know the borrower and guarantors are honest and have integrity. Additionally, the lender needs to be confident the applicant has the background, education, industry knowledge and experience required to successfully operate the business. Lending institutions may require a certain amount of management and/or ownership experience. They will also ask about your licensing and whether or not you have a criminal record.

As history is the best predictor of the future, a lender will examine the personal credit of all borrowers and guarantors involved in the loan. Sound business and personal credits are a must. Check both reports before calling your lender; if there are any delinquencies, be prepared to explain. The lender may be able to make exceptions for low credit scores.

• Collateral: A lender will consider the value of the business’ assets and the personal assets of the guarantors as a secondary source of repayment. Collateral is an important consideration, but its significance varies depending on the type of loan. A lender will be able to explain the types of collateral needed for your loan.

• Condition: The lender will need to understand the condition of the business, the industry, and the economy, which is why it is important to work with a lender who understands the funeral industry. The lender will want to know if the current conditions of the business will continue, improve or deteriorate. Furthermore, the lender will want to know how the loan proceeds will be used- working capital, renovations, additional equipment, etc.

The five components that make up a credit analysis help the lender understand the owner and the business and determine credit worthiness. By knowing each of the “5 Cs,” you will have a better understanding of what is needed and how to prepare for the loan application process.