Veterinary Practice Funding: The Essential Veterinary Practice Loan Guide

There were over 75,000 veterinary practices in the USA in 2020, with more than 50,000 of these exclusively providing care to companion animals. And the veterinary and pet care industry is growing—the market size of the veterinary industry in the USA is expected to increase 5.1% in 2021.

A number of factors are fueling this rapid growth:

• 30% of Americans adopted a pet during the COVID-19 pandemic, and revenue for the veterinary services industry increased 7.7% in 2020 thanks to this surge in pet ownership amid stay-at-home orders.
• The number of insured pets is increasing. According to the North American Pet Health Insurance Association, the total number of pets insured in the United States and Canada has grown 17.2% over the past five years, reaching 3.1 million in 2020.
• Millennials are the largest pet-owning demographic, and they are willing to pay more for quality services to improve the health and well-being of their pets.

As demand for veterinary services grows, so does the shortage in the number of qualified vets. Employment for veterinarians is expected to increase 17% from 2020 to 2030 and about 4,400 openings for veterinarians are projected each year.

The challenges faced by veterinary practices are also growing as they contend with increased demand and other challenges unique to the field, such as slow cash flow, continuing education needs, and maintaining qualified staff.

Veterinary practice loans can help vets overcome these challenges and embrace industry growth. All veterinary specialties can benefit from veterinary practice funding, including species-specialized veterinarians, veterinary behaviorists, veterinary clinical pharmacologists, veterinary dentists, emergency and critical care, internal medicine veterinarians, lab animal medicine, veterinary surgeons, and wildlife veterinarians.

Veterinary practice loans are designed for vets who are preparing to start their own practice, as well as established practicing veterinarians who are ready to grow. Long- and short-term loans for veterinarians are available, as well as secured and unsecured loans, including:

1. SBA loans for veterinarians
2. Bank loans for veterinarians
3. Alternative funding
4. Lines of credit
5. Veterinary practice acquisition loans
6. Equipment financing
7. Veterinary grant programs

Let’s take a look at these options.

SBA loans for veterinarians are not provided by the Small Business Administration—your application is processed and your funds are disbursed by commercial lenders and the loan is guaranteed up to 85% by the SBA. This reduces the risk to the lender, which in turn reduces your rates and fees.

The SBA offers a number of loans for veterinarians, including the popular 7(a) Guaranteed Loan program, Express Loans, and 504 Local Development Company Program loans:

• 7(a) Guaranteed Loans: These are the most popular loans for veterinarians, with the largest loan amounts, longest terms, lowest rates, and no restrictions on how funds are used. Loans up to $5M are available with terms up to 25 years, and funds can be used to meet long- and short-term needs, as well as for expanding or acquiring a practice.
• Express Loans: Express Loans are available up to $500,000 with SBA review completed in 36 hours. The SBA guarantees these loans up to 50% with rates and approvals determined by partnering commercial lenders.
• 504 Local Development Company Loans: 504 Loans are long-term, fixed rate term loans that are administered by Community Development Corporations (CDCs) through commercial lending institutions. The lender provides 50% of the funding, the SBA provides 40% of the funding, and the remaining 10% comes from the borrower. 504 Loans are granted to borrowers who are seeking to create or retain jobs or uphold other public policy goals such as supporting minority-owned businesses, revitalizing a business district, or rural development. These loans are commonly used for real estate or equipment.

Because they typically have the largest loan amounts, lowest rates, and longest terms, SBA loans are one of the most highly-sought loan options for veterinarians. Veterinarians are also a preferred business type for SBA lenders thanks to their stability, high earning potential, and lower likelihood of defaulting.

However, the application process for SBA loans is lengthy (sometimes up to 4 months) and requires extensive paperwork, along with years of detailed personal and business financial information. This documentation can be difficult to compile, and approval is never guaranteed.

Many commercial banks also offer loans up to $5M for veterinarians. Terms and rates are competitive but may not be as low as SBA loans, and will depend on the size of the loan and your business and personal credit histories.

Some banks, including Wells Fargo and Bank of America, offer loan options designed specifically for veterinarians. These loans may include features such as:

• Interest-only and graduated payment structures for start-ups
• Dedicated project managers for project-related loans
• Commercial real estate loans to purchase or refinance office space
• Equipment loans

Established owners may qualify to receive all their funds at once to self-manage a project.

Approval requirements may not be as strict as the SBA, but bank loans for veterinarians are still difficult to acquire, especially if you don’t have an existing relationship with a lender or you are still establishing your business credit. The application process can also take weeks or months with no guarantee of approval.

The anticipated revenue and stability of veterinary practices makes these businesses an attractive candidate for bank loans, but it may still be tough to get the funding you need if you’re a newer practice, have low credit, or can’t offer collateral. Banks tend to prefer approving larger loan amounts for larger, established businesses, which can make it tough for smaller practices to get the funding they need from a bank that doesn’t offer dedicated veterinary practice loan programs.

Alternative funding options for veterinarians are available from direct online lenders like Greenbox Capital®. These lenders have more flexible underwriting requirements than banks and the SBA, with less focus on credit score and financial history and more focus on the health and potential of your business. These lenders also offer streamlined applications and approval processes and can deposit funds in as little as 24 hours.

Multiple types of funding are available from alternative lenders, including more traditional funding options like lines of credit, collateral real estate loans, and term loans. These lenders also offer innovative non-loan forms of financing that are ideal for bridging cash flow gaps and providing working capital for growth, such as merchant cash advances and invoice factoring. There are no restrictions on how your funds are used.

Loan amounts are typically lower and terms are shorter than the SBA and bank loans. Because terms are shorter and approval requirements are less strict, rates may be higher. However, it’s a common misconception that alternative funding always costs more than other forms of funding. Ultimately, your rates and fees and the total cost of your funding will depend on the type of funding you’re seeking and your business’s risk assessment and creditworthiness.

Business lines of credit are available from traditional and alternative lenders, typically for longer terms than short-term funding options like merchant cash advances or invoice factoring, and with larger limits and lower rates than business credit cards.

Lines of credit offer the most flexibility. Borrowers can draw and repay from the line as needed, making this form of funding ideal for responding to unexpected expenses, purchasing inventory, repairing equipment, investing in growth, or filling in cash flow as needed. With fixed or revolving terms, you only ever pay interest on the amount borrowed.

Veterinary practice acquisition loans are designed for the express purpose of purchasing another practice, whether you’re just starting up, are purchasing a retiring veterinarian’s practice, or are considering expanding your current practice by acquiring another.

Multiple types of funding can be used to acquire a veterinary practice, including SBA 7(a) Guaranteed Loans, 504 loans, traditional bank loans, and alternative funding. Some lenders, including the Bank of America and Wells Fargo, also offer loan options specifically to help veterinarians acquire a practice.

Veterinary practice acquisition loans are typically for larger amounts, which means you’ll need to provide detailed financial information when you apply. Be prepared to supply:

• A purchase agreement
• Current balance sheet
• Year-to-date profit and loss statements
• Federal tax returns
• A schedule of inventory, equipment, and fixtures, as well as other assets when applying

You may also need to provide collateral to secure the loan.

Traditional equipment financing is offered by commercial lenders. Alternative lenders also offer funding options that can be used to purchase or repair equipment, such as merchant cash advances.

Equipment financing is designed specifically to finance the purchase or repair of veterinary equipment, such as scales, lighting, IV pumps, anesthesia machines, exam and procedure tables, and digital x-ray imaging and ultrasound machines, and more. The equipment serves as collateral, which can make these loans easier to acquire, especially if you’re just starting a practice. Loan terms will typically match the lifespan of the equipment, and a down payment may be required.

The USDA offers grants to help relieve veterinarian shortages and support veterinary services. Grants are available on a competitive basis to help practices develop and sustain veterinary services through education, training, recruitment, placement, and retention.

Authorized by the Veterinary Medical Services Act, the Veterinary Services Grant program offers large grants over $2M. Applications for 2021 are closed, so keep an eye on their website for key dates in 2022.

The best loan for veterinarians depends on your goals. The loan, including the type of funding, loan amount, and repayment terms, should serve a specific purpose that helps you achieve your business goals, such as purchasing or upgrading equipment, hiring staff, or improving your services.

For short-term funding, non-loan financing such as merchant cash advances or invoice factoring can provide a quick infusion of working capital that can help you maintain cash flow, cover unexpected expenses, or fuel your growth.

For long-term funding, SBA (7a) Guaranteed Loans offer the largest loan amounts with the longest terms and the lowest rates, but are the most difficult to acquire. Bank loans are a good alternative to SBA loans for veterinarians, especially if you have an established relationship with a bank or are working with a lender that offers loans designed specifically for veterinarians.

For fast veterinary practice loans, alternative lenders are always your best bet. These lenders, including Greenbox Capital, can approve and deposit funds in as little as 24 hours, while SBA and bank loans can take weeks or months to process with no guarantee of approval.

Veterinary practice loans can help vets overcome the unique challenges of their field, including:

• Slow cash flow: As veterinary care prices continue to rise, customers are often slower to pay. Providing options to pay over time using payment plans, prepayment plans, wellness plans, or pet savings accounts can help stabilize your cash flow.
• Continued education: Veterinarians are required to complete a minimum of 50 continued professional development hours per year. Meeting this requirement can place additional strain on your cash flow if you have to pay tuition, as well as take time away from working and earning revenue. Funding can help you meet these costs and manage your cash flow while you train.
• Maintaining qualified staff: Many veterinary professionals are leaving the industry because of stress and burnout due to COVID-19, new procedures, and the pet adoption boom. According to the American Veterinary Medical Association’s 2020 Census of Veterinarians report, poor work-life balance is the most common problem for veterinarians, with 75% naming it the top reason for wanting to leave the profession. Veterinary practice loans can help you maintain your cash flow while you hire and train new team members, as well as adapt to new procedures and larger client rosters.
• COVID-19: Appointments are taking longer due to safety regulations and capacity limits, which means vets see fewer patients per day while also contending with increased costs and demand. According to the AVMA, the average monthly cash shortfall across practices was $17,000 in April 2020 and $14,000 in June 2020. Funding can help you fill in cash flow gaps and keep growing under COVID-19 restrictions.
• Changing patient needs and growing demand: The pandemic adoption boom has created a major increase in demand for veterinary services. Veterinary practice loans can help you adjust your services or add to your team so you can see more patients and continue providing top-level care.
• Equipment and inventory: Veterinary inventory such as drugs, medicines, ointments, clinic consumable supplies, pet food, and other over the counter products is expensive but critical to providing top-notch services. Outdated or broken equipment can be costly to repair or replace. Small business funding such as equipment financing or short-term alternative funding like a merchant cash advance can help you cover these costs. Loans for veterinarians can also help you invest in new technology to keep your practice on the cutting edge, such as scales, lighting, IV pumps, anesthesia machines, exam & procedure tables, and digital x-ray imaging and ultrasound machines.
• Insurance: As of 2016, those in veterinary service professions were the second most likely to be injured while working. Insurance coverage for malpractice and workplace injury can be costly and strain your cash flow, but is mandatory for operating a veterinary clinic.

Veterinary practice loans can also be used to help grow or expand your practice. Pet owners spent more than $18 billion on veterinary care in 2018 and this number is likely to increase as pet ownership rises, presenting veterinarians with a number of opportunities for growth:

• Purchasing real estate: Reduce your monthly expenses and expand your assets by purchasing your current office space, or grow your practice by expanding to another location. Owning your veterinary office space also makes it easier to update or renovate to accommodate new services, hire more staff, or create a more comfortable environment for your patients.
• Acquiring a practice: Acquiring an existing practice is one of the simplest ways to start or grow your practice, but this method of starting up or expanding often comes with very high costs. However, these costs typically include the patient roster, as well as all equipment and fixtures, which can simplify the process of opening a new office and eliminate some of the stress of marketing your business to acquire new patients.
• Hiring staff: Whether you hire an office manager or additional practitioners to offer more services, hiring veterinary staff will enable you to take on more patients and meet increasing demand without sacrificing quality of care. Hiring and training qualified employees takes time and can be costly, and veterinarian practice funding can help you maintain cash flow and normal operations while your new hire settles in.
• Boosting marketing: Demand is increasing for veterinarians, which means it’s more important than ever to make sure new patients can find you easily. Invest in improving your website, managing your reputation online, or advertising online or locally to let your area know you’re accepting new patients, especially if you’ve added new services or have expanded to a new location.
• Upgrading technology: Smaller upgrades like new computer systems can help your administrative team work more efficiently so you can take more appointments and focus on providing care. New technologies, such as laparoscopic and laser surgery, diagnostic imaging 3D printing, microchipping, and telemedicine and mobile apps can also help you set your practice apart from the competition, but they can be costly to implement on top of your regular expenses.
• Improving patient services: Convenience is a priority for many patients in 2022. This can take many forms for your veterinary practice, including offering online billing and scheduling, prepayment options, online paperwork, expanded office hours, and additional services. These conveniences may require an investment of capital to implement, but they can set you apart from the competition and help you win new patients.

Veterinarians are often considered to be ideal candidates for funding because of their high earning potential, stable income, and high net worth.

Here’s what you need to know before you apply for a veterinary practice loan:

• Most veterinarians graduate with high amounts of student debt—the average student loan for a graduating dentist is just over $183,000. Some lenders will factor your debt-to-income ratio into your loan application, especially if you’re just starting up, while others, such as alternative lenders, will focus more on the health and potential of your business. Some lenders, including Bank of America and Wells Fargo, even have partnerships with the AVMA and will balance your student debt against your earning potential when evaluating your application.
• Revenue and billing structures for veterinary practices and delays receiving payments from patients and insurance companies can strain your cash flow, which may make it difficult to get approved for funding. Requesting payments up front, billing patients quickly, and providing payment options like payment plans and prepayment can all improve cash flow.
• You may be asked to provide a business plan that outlines a timeline of your veterinary practice’s income for the last 1-5 years, including costs associated with running your practice, an analysis of competition in your area, and how you intend to use and repay your funding. Some lenders, including the SBA, will require this, while others, such as alternative lenders, may not. It’s always a good idea to have it prepared just in case to minimize any delays with your application.