Getting the Cash
Components of the content supplied within this page can be credited back to Simmons & Associates Inc., Veterinary Sales & Appraisals.
For any queries you may have regarding Veterinary Sales or Purchases, visit the Simmons & Associates Inc. website.
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Ten years ago, owners selling their veterinary practice were financing the practice sale in full or, in the best-case scenarios, in part. This was happening because the financing options were limited. Nowadays, many commercial lenders are striving to offer their loan products to small businesses.
According to Small Business Administration (SBA) data regarding loan performance, veterinary practices are included in the category with the “lowest risk”. Commercial lenders often see buyers of veterinary practices to be a great opportunity for investment. Commercial lenders are not tied by the strict rules and regulations that govern the banking sector. As a result, these individuals or agencies that have money to invest in projects with good prospects will gladly create custom loan packages to accommodate both sellers and buyers.
The loans offered to buyers can be of various terms and with various interest rates. Some are mixed packages, all-in-one, for a period of 17-20 years. A traditional loan would be a combination of two loans. One would cover the business purchase for a period of 5-10 years, while the other would finance the property acquisition for a period of 10-25 years. While the all-in-one package has lower monthly payments, the interest cost for the entire duration of the loan can be significantly higher than with a traditional loan.
Generally, SBA loans will have laxer terms than traditional loans. On the other hand, conventional loans would require less paperwork and the cost of getting a loan contract would be lower.
Loans are approved based on the worthiness of the buyer to receive a loan, and not on their net worth. The lender will look at the profitability of the practice – namely, its cash flow – and they will also ask for a property appraisal, if real estate is included in the loan contract. The previous debts of the buyer, such as student loans, will not be an issue, unless there is a history of bad or overdue payments.
As you can see, financing the acquisition of a veterinary practice is not rocket science, and it has not been this easy to do it before. It is an even smoother process for the buyer with a clean credit history. Such a buyer would have his own practice up and running in no time.
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