Veterinary Practice Financing Rates
Current rates are all over the place, but in general veterinary practice financing or lending rates are very reasonable.
Loan rates for commercial real estate transactions, such as expansions or purchases of medical office space, remain favorable, as do loans for startup operating expenses, Bank of America’s Murray said.
“You’re seeing rates on the commercial side in the 4.5 to 5. 5 percent range,” he said. “We expect those to sit there for the next six to nine months.”
In addition to real estate loans, Bank of America offers conventional business loans. The business loan is for construction, equipment, working capital and medicines, including an opening supply order. Business loans are offered on a 10- to 15-year term at between 5 and 6.5 percent.
“Historically these rates are low, and they are the lowest we’ve ever had,” said Murray, who’s been with Bank of America for 15 years. “If you are considering a project or are considering some type of purchase, you will never find cheaper money than you will today.”
Live Oak’s York agreed money is cheap, but he noted that clinics seeking to expand should have good cash flow to qualify for a loan, because rates are closely tied to risk.
“When we’re evaluating, we’re really looking to the cash flow,” York said. “Does the business have the ability to support those additional services? We generally like to see at least the ability to cover the proposed debt services.”
According to York, 1.1 times debt service is an ideal ratio. That means for every dollar a month clinics must pay in debt, they should have $1.10 per month in cash flow.
Live Oak offers loans for an entire transaction—an all inclusive real estate and a business loan together at around a 4.5-percent range, with riskier lending heading into the 7.5-percent range. Start up practices can expect an adjustable rate in the high 5-percent to low 7-percent range.
However SBA loan rates are variable, adjusting quarterly in most cases unless they have a rate-lock provision, which of course costs the borrower a bit more.
Are there even lower rates out there? Low fixed rates? The answer is “yes” according to C. Walsh of Veterinaryloans.com. “The average veterinarian misses out on some great lending rates because they tend to only call the 3 or 4 most commonly advertized lenders. A borrower just got a 4% 10 fixed loan rate, with $40,000 working capital in addition to 100% of the practice purchase price, but it didn’t come from one of the main stream lenders.” he adds.