Frequently Asked Questions (FAQS)

Many times, a practice can be acquired with no, or very little, equity down. Experienced veterinary lenders are comfortable with the industry, and will stretch to minimize the equity needed upfront, recognizing this can be a barrier for a doctor just out of school. If there is a small equity requirement, often the selling doctor will take a seller note back for a small percentage (10%) of the purchase price to facilitate the sale. Don’t be deterred if you don’t have a lot of money to put into a good practice. Many veterinary lenders will view the investment you made in your education as the necessary down payment.

It’s usually a good idea to spend two to three years acquiring practice management skills. However, if a veterinarian is surrounded by great advisers (accountants, practice management consultants, experienced veterinary lenders, etc), he or she may be ready to buy a practice sooner. Some continuity in the practice’s management personnel is also helpful if they are excellent employees.

Veterinary hospital loans or practice loans are more available for acquisitions or expansions. This is because an existing practice has a historical cash flow that can be analyzed, and a customer base is already established. A startup will have a period of negative cash flow before becoming established, making it harder for most lenders to finance. If you are doing a startup, it is critical to find a lender who will help provide the working capital (cash) needed in the first few months of operation.

Most veterinary lenders want to see three years of financial statements (usually tax returns) on the practice being acquired, three years of personal tax returns, a personal financial statement showing assets and liabilities, a resume and a description of how the loan proceeds will be used (cost breakdown if a construction project). They will also ask for copies of leases on the property and current business debt outstanding. A business plan is typically required for a startup. For an acquisition, you will need to provide a copy of the purchase contract.

A veterinary practice loan or veterinary hospital loan can usually be closed in 30 days if all information is available.

A credit score above 700 makes getting a veterinary loan easier. A score below 700 will probably require some explanation if there are negative marks on a credit bureau. Some lenders have minimum acceptable scores, while others, such as Live Oak Bank, will look beyond a low score to the explanation of how it got that way.

A practice should have growing revenues with a cash flow margin above 25% before an owner’s salary is usually viewed favorably. If a practice’s revenue has been declining or if the margins have been poor, it requires a more in-depth analysis. Has the current doctor been cutting hours, leading to lost revenue? Is the practice not generating good margins due to the owner being out ill and paying relief veterinarians? What expenses can be added back that will not reoccur in the future? What is the acquiring doctor’s experience level? Has he or she practiced in this market before? All lenders’ analyses revolve around whether the practice can support the debt service and the owner’s cash requirements going forward.