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Compendium May 2011 (Vol 33, No 5)

In Practice—Apply With Confidence

by Brannon Moncrief

    How to position yourself for success when applying for veterinary practice financing

    Purchasing a veterinary practice is one of the most important decisions you will make in your professional career. Often, it unlocks the door to a considerable increase in compensation and personal freedom. However, if you are like most veterinarians, you will have to rely on third-party financing to purchase or make capital investments in your practice. To position yourself for success when applying for practice financing, it is imperative that you understand the perspective of veterinary lenders.

    Veterinary practices continue to thrive despite the recent economic downturn. Specialized veterinary lenders have the knowledge and experience to recognize that the veterinary industry is fairly insulated from adverse changes in the economy, thereby allowing this financing niche to remain largely unaffected by the current credit crisis. While veterinary lenders are likely to continue to aggressively pursue veterinary loan opportunities and offer competitive pricing, it is important to note that the credit crunch has influenced them to tighten their credit standards and evaluate borrowers more closely in three key areas: (1) personal credit history, (2) personal financial condition, and (3) professional experience.

    Personal Credit History

    The loan application process is often your first introduction to a lender. Because the lender does not typically have a long-term personal relationship with you, the industry standard is to rely on your personal credit history as your primary character reference. While it is ideal to maintain a credit score above 700, most lenders will fund transactions for borrowers with a credit rating of at least 650. If your credit score is below 700, be prepared to answer questions pertaining to delinquent accounts, high credit card balances, and any other factors that may have lowered your score. To ensure that you maximize your credit rating and present yourself in the most favorable light, I encourage you to employ the following steps in managing your credit:

    Check your credit regularly (every 6 months).

    Correct any mistakes or instances of credit card fraud. If any mistakes or signs of credit card fraud appear on your credit report, immediately contact the credit grantor to dispute the charge or correct the discrepancy. You should also contact the credit reporting agency to notify them of the mistake and submit supporting documentation so that the correction can be made to your credit report.

    Pay your obligations in a timely manner. A delinquency will appear on your credit report if a payment to a credit grantor posts more than 30 days past the due date. Lenders consider current or past delinquencies to be signs of unwillingness or inability to repay your obligations as promised. If you have delinquencies on your credit report, be prepared to provide the lender with an explanation of each one.

    Limit your use of revolving debt. Revolving debt includes all debt relating to credit cards, charge cards, or home equity lines of credit. This type of debt can substantially reduce your credit score and is looked at unfavorably by lenders. Once revolving accounts have been paid off or retired, do not close these accounts, as availability (not use) of revolving credit will boost your credit rating.

    Avoid declaring bankruptcy at all costs. Most lenders will not consider anyone who has declared bankruptcy within the past 7 to 10 years as a financing candidate.

    Personal Financial Condition

    Unlike traditional banks, veterinary lenders understand and are comfortable with the fact that most veterinarians with only a few years of work experience are carrying a substantial amount of student loan debt and have a negative net worth. What these lenders pay closer attention to is whether you are “living within your means.” Lenders want to verify that your lifestyle matches your personal income level at the time you apply for practice financing, as they can only assume that your current approach to managing your personal finances will continue into the future. An interest-only or adjustable rate mortgage and/or substantial levels of credit card debt are key indicators that you may not be maintaining a lifestyle consistent with your personal income level. This situation often makes lenders uneasy about a prospective borrower’s spending habits. Therefore, you may want to consider postponing any major discretionary purchases—such as luxury items or expensive vacations—until after you purchase your practice and generate sufficient income to pay for these purchases with cash or can keep up with the monthly payments using your personal income rather than revolving debt.

    It is also important to note that lenders often evaluate recent graduates and more seasoned veterinarians from different perspectives. While it is understandable that recent graduates will be carrying large student loan balances and a negative net worth, a lender will expect established veterinarians to be able to save money and reduce debt obligations and, therefore, be in a more favorable personal financial situation. Experienced veterinarians with weak financial statements should be prepared to explain their current personal financial condition to mitigate any perceived risk from lenders.

    Professional Experience

    Most veterinary lenders require a financing candidate to have 1 to 2 years’ experience after veterinary school before pursuing practice ownership. The exact level of experience required to qualify for a loan can vary depending on the loan amount, size and type of practice being acquired, buyer’s production capabilities, buyer’s business acumen, and more. Lenders may require less experience if the financing candidate has been working in the practice that he or she is looking to acquire.

    If you are a young doctor who is considering purchasing a practice within a few years after graduation from veterinary school, it is wise to search for an associate position in a busy practice that can give you the necessary training and production responsibilities to quickly increase your hand speed and the array of services you can provide. Your production/collection reports from your associate position can also be useful evidence to a lender that you are capable of producing at the level of the selling doctor and experienced at performing all of the veterinary services historically offered by the seller. While working as an associate, it is also extremely valuable to pay close attention to the responsibilities involved with owning and operating a practice outside of performing veterinary services, which will allow you to better understand and be prepared to handle the business side of practice ownership. Lenders typically interview potential financing candidates to verify their production capabilities as well as get a feel for their business acumen. Possessing the experience and knowledge to intelligently discuss and apply both the clinical and business aspects of practice ownership will impress your lender and increase your chances of securing loan approval.


    If you take the time and effort to ensure that these three aspects of your personal and professional life are in order, you can rest easy in knowing that practice financing is readily available and that you are in a great position to further your career by pursuing practice ownership.

    Brannon Moncrief is the director of veterinary lending with PPC LOAN, a nationwide lender with over 13 years of experience specializing in providing financing to veterinarians.

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