Myth

No way a recent grad can afford to buy a practice

Abstract

There are several benefits to becoming an owner, including increased annual income and investment value. Understanding the financing landscape is important for veterinarians to understand in order to purchase the practice. Veterinary practices are typically valued as a multiple of historical earnings. To ensure maximal value of their business, sellers should be concerned with the profitably of their business for at least 3 years prior, and work with a business valuator to set the price of their practice. Industry specific third-party lenders have come to understand the veterinary landscape and the challenges inherent to our industry, such as the large student debt burden that recent graduates face. Fortunately, many cash-flow based loans allow for the transaction to still occur despite a collateral shortfall. The cash-flow analysis is at the core of the loan approval process to ensure that the new business owner will be able to pay the ordinary business expenses, pay the new proposed debt, pay themselves a sufficient salary to cover their personal obligations, and have some cushion left over. The strength of the veterinary profession and historically low default rates allow lenders to become comfortable lending to veterinarians to purchase practices.