Financing a Veterinary Practice: 5 Tips For Expanding, Purchasing, or Starting Your Practice

0 Comments Posted by Alyssa Noonan in General on Monday, September 23rd, 2019.

Financing a veterinary practice is an essential part of establishing your career path. Choosing the right form of financing can make a huge difference in the quality of services that you are able to provide for your patients. Taking the time now to set up a solid foundation for your business will help you flourish for years to come. Follow our tips on how to properly finance your veterinary practice.


  1. Grow Your Network

An often-overlooked part of opening a veterinary practice is hiring the right team of advisors. Every small business owner will need to hire a team of professionals that will guide them through this transition. This team should be specific to your practice because industry-specific advisors can help you make the right choices unique to your needs. Ideally, you want these advisors to have several years of experience with successful veterinary practices.


Specifically look for the following individuals who have proof of success with veterinary practices:


  • Veterinary Attorney
  • Practice Management Consultants
  • Certified Public Accountant
  • Contractors
  • Veterinary Marketing Specialist


Once you have found one advisor, ask them for recommendations on other professionals in the industry. Many of your advisors will have a network of veterinary professionals that will be able to help you in all areas of this transition. Your network should consist of people that you can reach out to and utilize for the duration of  veterinary career.


  1. Evaluate Your Current Financial Situation

Several factors can influence your candidacy for a loan, so you should know exactly where you stand financially. These factors include:


  • Location of practice
  • Cash flow
  • Potential for growth
  • Personal debt
  • Credit score


To qualify for many small business loans, you will need to have a credit score above 650. Lenders like to see that you make payments on time and are responsible. However, personal debt won’t always deter lenders from providing you with a loan. It will affect the amount of loan you will be required to take out. The higher the debt, the higher the loan you need. This loan will need to be able to cover your existing debt, a reasonable income for yourself, and financial stability for the practice. You should also have room for unexpected costs that may arise. Working with a Certified Public Accountant who has experience with veterinary practices will help you understand what type of loan you should take out.


  1. Borrow What You Can Pay Back

There is no question that keeping your debt low and your income high will benefit you financially. However, this can also affect the type of loan you qualify for. Personal debt is a major factor in taking out a small-business loan. This includes student loans, credit card debt, car loans, a home mortgage, or anything else that you are required to pay on a monthly basis. Large personal debt will not disqualify you from taking out a loan, but it will require you to borrow more money. Your veterinary practice will need to be able to generate enough income to cover your personal salary, monthly debt payments, and new loan payments. The larger the existing debt, the more money will be required to pay it back. This is why it is easiest for you to keep your personal debt low during this transition. It also helps you look good on paper if your personal debt is manageable and your income is on the higher side. Large sums of money are required to pay for a new business, but if you choose the right loan for your situation then you should be headed in the right direction.


  1. Understand Your Loan Options

The first step to understanding what you qualify for is understanding where you currently stand financially. You will also need to outline your goals for the practice so that you can have a clear picture of where you would like to go in the future. There are several different types of loans available for veterinary practices because they are considered small businesses. Your individual needs will determine which type of loan would best serve your veterinary practice.


Taking out a large loan is fine if you can afford it. Pay the minimum payments in the beginning while you stabilize your business and your profits increase, then pay larger payments once you are able to do so. A longer loan term with a fixed competitive interest rate can give you the flexibility you need to comfortably pay back the loan.


There are five common types of loans that you can apply for to finance your veterinary practice:


  • Small Business Administration 7(a) Loan
  • Bank Loan
  • Short-term loans
  • Business Lines of Credit
  • Dental Equipment Loan


You will need to speak with your financial advisor to determine which type of loan would best suit your needs. These loans could either be based on cash flow of your current practice or the practice you will be acquiring, or it could be based on a type of collateral. A loan based on collateral will typically require a higher payment upfront so be sure to have enough money readily accessible to pay for the loan.


  1. Make a Business Plan

Unfortunately, not all veterinarians have experience running a business. Having a cohesive business plan can make a world of a difference when it comes to the success of your practice. This step is often overlooked by veterinarians but it is essential to having a healthy, profitable business. Your team of advisors can guide you in designing the right business model and they can share their experiences with you to set you up for success. Your Practice Management Consultant will likely be the most helpful advisor for this step because they will be able to guide you with all of the administrative tasks and alert you to any blind spots you may be unaware of.


A digital marketing firm can also help you to prepare your marketing and advertising plan to ensure revenue grows quickly within the first few years. You should partner with a vet-focused marketing firm to help you promote your brand, keep your schedule full & grow practice revenue.


Speak with your network of advisors to learn more about this new chapter in your career and seek the guidance of other veterinarians who can share their business advice. Gaining insight from your peers is a key factor in the success of your practice.

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