From Associate to Owner: Guide to Veterinary Practice Lending and Your First Acquisition

Key Takeaways:

• Learn about veterinary practice lending and how it helps first-time veterinary practice owners.

• Features and benefits of SBA 7(a) loans for veterinary practice acquisition.

• Get tips to prepare for acquisition, conducting due diligence, and negotiating agreement terms.

Many veterinarians in the United States are now reaching a significant point in their careers, where the goal is practice ownership. A change from an associate veterinarian with long hours to an owner who now controls their professional future.

Most veterinarians start looking for veterinary practice lending solutions, to acquire a practice when they are ready to take this next step. A well-suited financing allows buyers to purchase the right kind of practice, determine a fair market value and make the transition easier.

The trend for veterinary ownership has increased over the past few years, as pet ownership continues to rise each year. Consumer expenditures on pet care services are also increasing, which is why lenders recognize the financial stability of veterinary practices.

This article explains how buyers can use veterinary practice lending to complete a practice acquisition. It also discusses due diligence, valuation, transition agreements, and negotiation strategies.

Why Many Veterinary Associates Consider Ownership?

Many veterinarians, after a successful career, may find that their clinical work remains exciting and satisfying. But the decision-making opportunities are almost unavailable. When you own your own practice, you are empowered to develop your own style of delivering pet care and build long-term wealth. Veterinary practice lending is becoming more popular for veterinarians for the following reasons:

• Market growth - U.S. consumer spending on veterinary care has increased steadily. This creates opportunities for new practice owners.

• Competition from corporate groups - Larger organizations often buy profitable clinics. This motivates individual veterinarians to act earlier so they are not priced out.

• Favorable lending programs - Many lenders now provide specialized veterinary practice loans that recognize the stability of the profession.

As a business owner, veterinarians can create their own work schedule, invest in new equipment, and increase the range of services offered to clients over time. Therefore, by taking control of their business decisions, veterinarian business owners can make choices to help strength their practices' cash flow. This is a crucial component of the underwriting and valuation process.

What is Veterinary Practice Lending?

The term veterinary practice lending describes financing solutions designed specifically for veterinarians. These programs focus on:

• Buying an existing practice

• Starting a new practice

• Purchasing equipment

• Renovation and commercial real estate needs

• Working capital for operations

• Refinancing or consolidating debt

• Business expansion

Lenders familiar with this sector often understand the economics of a veterinary practice, better than general business loans. They recognize how revenue cycles work. They understand staffing requirements. They know that a stable client base contributes to predictable monthly payments and manageable loan terms. Here are typical characteristics of veterinary practice lending:

• Larger loan amount available for potentially strong borrowers

• Flexible financing options available

• Availability of lines of credit to supplement working capital

• Underwriting that may focus heavily on practice cash flow

Many lenders also support online banking, business checking, checking account services, business credit cards, and business banking tools to help new practice owners manage cash flow after acquisition.

SBA 7(a) Loans for Starting Veterinary Practice

The Small Business Administration (SBA) offers government-backed financing through its SBA 7(a) loan program. These SBA loans for veterinary practice are widely used by first-time buyers because they offer manageable repayment structures.

According to SBA guidelines, the SBA 7(a) program can be used for:

• Practice acquisition

• Real estate related to the business

• Equipment purchases

• Working capital needs

Key SBA 7(a) Features

Following are some of the important features of SBA 7(a) loans that veterinarians must know:

• Maximum SBA 7(a) loan amount: Up to $5 million

• Guarantee: Up to 85% on loans less than $150,000 and up to 75% on loans above $150,000

• Eligible businesses: Must be "for-profit" small businesses operating in the U.S.

• Use of proceeds: Acquisition, real estate loans, renovation, equipment, working capital, and more

Veterinary practice lending aligns well with SBA standards if the practices generate stable income and have long-term value.

Advantages of SBA 7(a) for Veterinary Practice Buyers

• Repayment periods may be longer than some conventional loan options, which can help with monthly payments.

• Veterinary practice lending through SBA loans may support 100 percent financing when the practice demonstrates strong, stable cash flow.

• Some lenders offer fixed rates, depending on market conditions.

• This funding option may be helpful for first-time buyers who want to purchase a profitable existing practice.

Up to 100% Veterinary Practice Acquisition Loans

Many banks in the United States offer veterinary practice acquisition loans with up to 100% financing, meaning no down payment in some cases. These programs are designed specifically for licensed veterinarians. Banks often provide such high-leverage lending because healthcare professionals generally have strong credit and low default rates. This makes veterinary practice lending through conventional banks an attractive option for acquisition when:

• The buyer has strong professional experience

• The target practice shows reliable cash flow

• The borrower has a solid credit score and financial stability

• The loan process shows acceptable risk during underwriting

Banks often include:

• Business line of credit access

• Support for equipment financing

• Assistance with transition-period planning

• Interest-only introductory repayment structures in some cases

• Programs structured by equal housing lender or member FDIC institutions

How to Prepare for the First Acquisition?

Preparing to take ownership of a vet practice does not stop at locating an appropriate veterinary practice lending option. There are also other aspects where buyers need to prepare financially and operationally, with lenders favoring those who demonstrate preparedness for ownership. So, below is a list of what lenders generally expect before they approve loans for the purchase of any type of veterinary practice:

1. Strong Personal Financial Profile

• Stable income history

• Good credit score

• Manageable personal debt

• Proof of savings and financial responsibility

2. Documentation for Credit Approval

In general, lenders will typically require the following:

• Personal and business tax returns

• Bank statements

• Resume showing veterinary experience

• Purchase agreement drafts

• Preliminary valuation documents

3. Business Plan

A lender usually evaluates:

• Projected Revenue

• Expected Staffing Requirements

• Expected Operations

• Expected Marketing and Community Outreach

• Estimated Financing Required and what the borrower will ask for on the loan.

4. Understanding Cash Flow

• A lender will calculate the practice's debt-service coverage ratio (DSCR).

• This shows whether projected cash flow can support monthly payments on the loan.

Conducting Due Diligence: Veterinary Practice Lending

Due diligence helps the buyer understand what they are purchasing. It also allows lenders to evaluate the risk in lending.

Financial Due Diligence

Should consist of the following documentation:

• Tax returns for the last 2–3 years

• Profit and loss statements

• EBITDA and adjusted cash flow

• Payroll costs

• Cost of goods sold

• Service mix and pricing

The primary reason for the financial due diligence step is that lenders determine the strength of revenue & profit from a veterinary practice through financial due diligence.

Operational Due Diligence

Focus on:

• Staff turnover

• Technology and equipment

• Appointment volume

• Client loyalty

• Building condition (if real estate is included)

If the transaction includes commercial real estate, lenders may also review building inspection reports.

Legal Due Diligence

Review:

• Employment agreements

• Licensing

• Leases

• Supplier contracts

• Insurance policies

The outcome from the legal due diligence and the financial due diligence will help determine the value of the practice and the lender's decision to lend.

What is Veterinary Practice Valuation?

Practice valuation determines what a buyer will pay and what a lender will finance. Common valuation methods include:

• Income approach: Based on cash flow

• Market approach: Compares similar practice sales

• Asset-based approach: Based on physical assets

Veterinary practice lending generally includes valuation to ensure that the amount being requested for the loan corresponds to the value of the practice. Good valuations help improve negotiations and credit approvals for the borrower.

Negotiating Transition Agreements

Buying a vet clinic involves more than just the purchase price. How well you keep your clients during the transition period is also very important. Transition agreements typically have these components:

Seller Employment

• Seller may stay for several months to support client handoff.

• This can help stabilize cash flow during early ownership.

Non-Compete Clauses

The terms of these clauses may differ from state to state. They may help protect the clinic after it has been sold.

Training and Support

Sellers may provide mentorship during the transition.

Repayment and Loan Terms

Borrowers may negotiate:

• Introductory interest-only periods

• Flexibility for early refinance or refinancing

• Amortization schedules

• Fixed rates versus variable structures

Negotiating these terms with a lender may help align those terms with the operating needs of the buyer.

Conclusion

Stepping up from a position as an associate to becoming an owner of a veterinary practice, is a major milestone for any veterinarian. An effective veterinary practice lending strategy may assist prospective buyers evaluate business opportunities and negotiate stronger contract agreements. Ultimately, this strategy helps borrowers obtain the financial resources needed to acquire their first veterinary practice via approved financing.

Financing solutions, like SBA 7 (a) loans, lender programs with 100% financing, and lenders with specialized veterinary practice financing programs, provide prospective buyers with a clear path toward ownership. Careful due diligence and thoughtful negotiation may help new practice owners build a strong foundation for long-term success.