Owning the numbers: How to buy a veterinary practice with proper funding

Buying a veterinary practice is often described as a career move, but anyone who has taken the leap knows it’s much more than that. It’s a life decision that connects your daily work to your long-term financial trajectory in a way no associate job ever will.

Ownership blends your income, time, and future wealth into a single ecosystem, and the way you finance the purchase determines how that ecosystem functions. The challenge is that many veterinarians walk into the process focused almost entirely on the asking price, without understanding what lenders evaluate or how those choices ripple through their early years as owners.

At its core, practice financing is a risk-management exercise. Lenders care about 3 things: the cash flow of the business, the buyer’s experience, and the personal financial strength of the person applying for the loan. Cash flow is the backbone—every meaningful decision flows uphill or downhill from this one metric.

Most lenders look for a debt service coverage ratio of about 1.25 to 1.35, which means the practice must earn 25% to 35% more than the annual loan payments require. This standard comes directly from the lending guidelines of the Small Business Administration (SBA) and is echoed by most veterinary lenders because it provides a safety margin in the early years of ownership.¹ Even strong practices can experience some turbulence after a transition, so the bank wants assurance that the numbers can handle it.

Experience matters too. Not because banks expect you to be a superstar, but because they need evidence that you can maintain revenue once the seller steps back. Many lendersprefer buyers with at least 2 years of clinical experience and at least 1 year of consistent individual production.^2,3 They’re looking for stability, not perfection.

Your personal finances play a quiet but meaningful role. Even though lenders lean heavily on the practice’s ability to repay the loan, they still examine your credit score, liquid reserves, and current debt payments. In most cases, a credit score of 680 or higher and 5% to 10% of the purchase price in liquid assets are standard.³

Student loans aren’t typically a deal-breaker because what matters is whether those payments are manageable alongside your projected owner income.

Many deals run into friction not because the buyer lacks ability but because their personal balance sheet wasn’t prepared before the application went in.

Choosing the right funding structure is another place where clarity pays off. The SBA 7(a) loan remains popular in veterinary transitions because it allows for lower down payments and can bundle goodwill, equipment, and working capital into a single loan package.⁴ The downside is straightforward: more paperwork, more fees.

Conventional loans move faster and involve fewer administrative hurdles, but they generally require larger down payments and stricter underwriting.

Some of the strongest deals include seller financing, where the seller carries 5% to 15% of the purchase price. This may lower lender risk and could help facilitate approval, especially when the margins are tight or the purchase price is aggressive.

There’s no perfect formula for everyone; the best loan is the one that supports healthy cash flow and leaves you with enough liquidity to run the business confidently.

Liquidity is an important factor for first-time buyers. Adequate working capital can help facilitate a smoother transition.. Even profitable practices experience cash tightness in the first few months after closing. You’ll be restocking inventory, covering payroll, and addressing transition glitches no one mentioned during due diligence.

Many lenders recommend building $50,000 to $150,000 of working capital into the loan—an amount that varies with practice size and staffing needs.² It’s not extra; it’s a buffer that protects your decision-making in a vulnerable period.

Understanding the practice itself is just as important as understanding the loan. Before making an offer, review production by doctor, evaluate revenue per DVM, and look closely at profit margins.

According to the American Veterinary Medical Association’s economic data, small-animal practices typically run with profit margins between 10% and 18%.⁵ Margins below that range aren’t always a deal-breaker, but they do require a turnaround plan—and they significantly limit your ability to pay yourself well in the early years.

The most common mistakes buyers make are often preventable, and overpaying is at the top of the list. Some practices are listed at valuations that simply don’t align with their cash flow reality. The second mistake is failing to stress test the loan.

It’s worth running the numbers assuming small shifts—slight revenue dips, increased payroll costs, or slower-than-expected growth. If the practice still covers the debt comfortably, your financial position may be more stable..

Buying a veterinary practice can be a different experience when you take time to understand all aspects. Ownership involves coordinating your personal finances, clinical capacity, and the economics of the practice. When these factors are considered, the transition may be clearer and more stable.

DISCLAIMER:

This material is intended for general public use. By providing this content, Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.Neither Guardian nor its subsidiaries issue umbrella or auto insurance. CJ Burnett, CExP, is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. Florida Veterinary Advisors is not an affiliate or subsidiary of PAS or Guardian. Florida Veterinary Advisors is not registered in any state or with the US Securities and Exchange Commission as a Registered Investment Advisor. The individuals associated with Florida Veterinary Advisors do not maintain specialized licenses or qualifications for the financial services provided to veterinary professionals. CJ’s CA Insurance License # 0K79676, AR Insurance License #16257929. #9181161.1 Exp. 10/2028