2020 has been a challenging year for business owners on nearly every front. Whether your veterinary clinic was forced to close for a time or your clients brought their pets in less often, you had to get creative to maintain success. If you were looking to make changes to your clinic, you might have noticed that some banks are less eager to work with you.
COVID-19 has forced some lenders to shy away from lending to those in the medical industry. However, plenty of community banks are available to help practice owners reach their goals. While the economy might still be uncertain, you may be ready to take the next step now. If you need a loan to make it happen, a community bank that provides financing through a Small Business Administration loan can be a good option.
SBA loans are an attractive financing option because they are guaranteed by the government. That means that while a bank will issue the loan, should you be unable to repay it for any reason, the bank will receive partial compensation from the government. Because of the guarantee, banks view such loans as less risky, and the loans typically come with more flexible rates and terms.
The Application Process
Because SBA loans involve the government, the application process is thorough. You will need to provide information about your personal and business finances, your credit history, tax returns, details about the building you are looking to purchase (if applicable), and any additional documents as specified by the lender. The strenuous application process is one reason that an SBA loan is often not pursued, but preparing your documents early and staying organized can make the effort more feasible.
Credit, Debt and Down Payments
Most lenders will ask that you put at least 10% down. If this is your first clinic, your down payment will need to be in cash, but the money can be gifted from a family member or friend. If you are already running a successful office, you can use equity for your 10% injection.
Lenders don’t worry about debt as much as they worry about your cash flow and credit history. A credit score of 650 or higher is ideal, but most lenders will not be surprised if you have a substantial amount of debt after so many years of medical school and building your family. What would be troublesome to a lender, however, is a poor loan-repayment history or a bankruptcy. If your credit report has markings like these, you’ll need to work hard to prove to the lender that you are fully recovered and responsible enough to repay a loan.
When gathering a down payment, remember to not completely deplete your savings. You still need cash to maintain your lifestyle. Taking on additional financial responsibility without a comfortable nest egg will set yourself up for failure.
Tips for Choosing a Lender
While it is no secret that the SBA loan application process can be lengthy, working with a preferred lender can significantly shorten the timeline. Preferred lenders are authorized by the SBA to make a number of credit decisions on their own, completing what could have been a two-month process in just seven to 10 business days.
A lot of community banks offer SBA loans, but working with a lender that specializes in veterinary lending will be beneficial. Specialty lenders know the ins and outs of veterinary clinics. They are able to advise you on more than just the numbers, whereas a general lender may not.
This past year has had its ups and downs, but it doesn’t mean you still can’t achieve your goals and grow your business. If you’re looking to upgrade, expand or open a clinic, an SBA loan through a community bank might be the solution.