Veterinary Practice Loan
Have a passion for helping animals? Maybe it's time to start your own veterinary practice.
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It takes a certain type of person to be a veterinarian. You have honed your skills and have the power to make a real difference in the lives of animals and the people who love them. If you've been working as a vet for a number of years and the time is now right to start out on your own, read on to find out everything you need to know about obtaining a veterinary practice loan.
What factors should you consider when buying a veterinary practice?
When considering setting up your own veterinary practice, the first question to ask is whether you want to start it from the ground up or purchase an existing veterinary business.
If you are considering starting your own veterinary practice:
- You should have at least two or three years’ veterinary experience before applying for finance.
- You will need to work with your accountant to build a business plan that accurately projects your plans and expectations for the future of the practice.
- The business plan will need to consider competitors in the surrounding area, taking into account any differences between your proposed veterinary practice and existing ones, such as a field of specialisation or price competitiveness.
If you are thinking of purchasing an existing veterinary practice:
- Note that experience is not as important when purchasing an existing practice, however lenders will still take it into account.
- Consider whether the existing veterinary practice matches your interests and skill set. Your practice will be disadvantaged from the start if, for example, it is a general practice and you are highly specialised.
- To what extent will the premises need to be renovated to suit your requirements?
- Do the existing premises have room for expansion should you wish to add additional consulting rooms or provide additional services like diagnostic imaging?
What do I need to know about veterinary practice loans?
Vets are in a strong bargaining position when it comes to veterinary practice loans compared to loans for other business types. Lenders are aware that veterinarians tend to earn an above-average income, coupled with the fact that demand for veterinary services has only increased in recent years.
As such, lenders are likely to be very interested in considering an application for a veterinary practice loan and, under certain circumstances, could offer to lend up to 100% of the loan amount and may even negotiate on interest rates.
When applying to finance the purchase of premises for a veterinary practice:
- The loan amount could be up to 100% of the value of the property.
- The maximum loan term is likely to be 25 years.
- An interest-only term of up to five years can be negotiated.
- An overdraft facility can be negotiated.
If applying to finance the purchase of an existing veterinary practice:
- The loan amount could be up to 100% of the value of the business. Keep in mind that the lender will determine their own value of the business, which may not equal the amount you have negotiated with the seller.
- The loan amount can include amounts required to finance equipment and to fit out the premises.
- The maximum loan term will depend to some extent on the proposed lease agreement and may be close to 15 years.
- You can negotiate an overdraft to fund your ongoing business running costs.
How can I make sure the business is worth buying?
In a veterinary practice, perhaps more so than many other business, it is primarily the staff that keeps customers coming back. Today more than ever, pets are treated as members of the family and people feel it is a privilege to entrust a vet with the care of their animal family members. As such, the reputation of a veterinary practice is one of the most important factors to consider when deciding whether to purchase an existing practice.
Is the current owner willing to include a non-compete clause in the contract for sale? If not, this is a red flag as there would otherwise be nothing to stop the current owner from opening another veterinary practice just down the road.
Reason for sale
Why is the veterinary practice for sale? Is it because of problems with the way the business has been run, or an issue relating to the business's reputation in the community? Reputation is everything when it comes to a veterinary practice, so ensure that you are told – and believe – the reasons for sale before going any further.
A genuine seller will be willing to negotiate a transition period of up to six months to ensure the smooth takeover of the business.
Part of the purchase of the veterinary practice will include the list of past and current clients. Consider negotiating with the current owner to contact previous clients during the transition period to advise them of the sale of the business. Clients will be more likely to continue visiting the veterinary practice if they have the word of the former owner that you are experienced and qualified to treat their pets.
Enlist the help of your accountant to ensure that you understand the current liabilities of the existing veterinary practice. All liabilities relating to the business will be passed to you on the sale of the business, so you need to make sure that unpaid staff entitlements and amounts owing to suppliers, for example, are taken into account when negotiating the purchase price.
Stock and equipment
Ensure that you understand the stock, consumables, medical supplies and other equipment that are included in the purchase price, and those that aren't.
Ultimately, you can assess whether a veterinary practice is a business worth buying by enlisting the help of your accountant to ensure that you ask the right questions. A good seller will be open and honest with the answers to your questions, and willing to provide all documents and information as requested.
How can I finance the purchase of a veterinary practice?
The purchase of a veterinary practice can be financed through a business loan. A business loan requires residential property to be put up as security for the loan and cannot be taken out using the business itself as security.
Vets are typically held in high regard by lenders, evidenced by the fact that many lenders will offer up to 80% of the value of the property or business for the purposes of a veterinary practice.
In addition to residential property as security, the lender will also likely request a fixed and floating charge over the commercial property or the business assets as applicable, and may also ask for a director's guarantee as additional security.
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Frequently asked questions
How long should I negotiate my lease terms?
If leasing suitable premises, consider lease terms of three to five years. If you are planning to undertake major construction on the premises, five years or longer may be appropriate.
Do I need personal insurances?
The lender may require that you take out life cover insurance and/or income protection insurance to ensure that you can continue to service your loan, even if you are no longer able to practice as a veterinarian.
What qualifications do I need?
Before applying for a veterinary practice loan, ensure that you are a current registered member of the veterinary board in your state or territory.
- Australian Capital Territory: Veterinary Surgeons Board of the ACT
- New South Wales: Veterinary Practitioners Board of New South Wales
- Northern Territory: Veterinary Board of the Northern Territory
- Queensland: Veterinary Surgeons Board of Queensland
- South Australia: Veterinary Surgeons Board of South Australia
- Tasmania: Veterinary Board of Tasmania
- Victoria: Veterinary Practitioners Registration Board of Victoria
- Western Australia: Veterinary Surgeons Board of Western Australia
Note that most Australian jurisdictions are working towards national recognition of veterinary registration, which would allow vets to move freely across the country without needing to reapply for professional membership. Currently, New South Wales, Queensland, South Australia, Tasmania and Victoria have taken steps towards adopting a national framework, allowing veterinarians registered in another Australian state or territory to practice without applying for new registration.
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