Like a doctor checking a patient’s vital signs, your veterinary practice has vital signs, too, none of which are more informative than cash flow. If a business consistently has more cash coming in than going out, it can operate indefinitely. But what happens when business slows down, or you have a major opportunity that requires more cash than you have on hand? You will likely need to explore your short and long-term financing options. In this blog, we’ll explore the available options and point out a few common pitfalls to keep in mind.

High-Interest Financing

What was once reserved for traditional financial institutions now feels commonplace. Nowadays, it’s as though everybody is offering financing [I.e., fintech companies, software providers, credit cards, etc.]. A relatively new example is QuickBooks’ line of credit option, which has been gaining popularity. While this type of solution is great for accessing cash in a hurry, sometimes within days or even hours, it comes at a steep cost. This cost is usually expressed as a 20% + interest rate, which is dramatically higher than traditional financing options. A debt of this type must be repaid swiftly, otherwise the accruing interest will begin to strain cash flow [I.e., potentially the very problem you are trying to solve]. When quick repayment is not an option, consolidating your debt into a lower-rate bank or SBA loan is a great alternative, as detailed below.

Traditional SBA Loan

For major investments such as purchasing a practice, buying real estate, or financing a significant expansion, an SBA loan is often one of the most attractive options. SBA loans typically offer longer repayment terms, lower monthly payments, and competitive interest rates because they are partially guaranteed by the U.S. Small Business Administration.

The tradeoff is time. SBA loans require substantial documentation, underwriting, and lender review. Closing often takes 30 to 90 days, depending on the transaction. While the process can feel tedious, the long-term savings in interest expense often make the additional effort worthwhile.

SBA Express Program

If your business needs capital faster than a standard loan cycle allows, the SBA Express program is a great alternative. This program provides up to $500,000 in financing by granting lenders “delegated authority,” which allows them to use their own internal underwriting processes rather than waiting for a full SBA review. While the SBA’s guarantee is lower than a standard SBA loan [meaning lenders may have stricter credit requirements], the trade-off is a significantly expedited timeline, with SBA responses often occurring within 36 hours. It is an ideal solution for businesses requiring quick access to working capital, equipment, or lines of credit without the extended wait times of traditional SBA financing.

Traditional Bank Financing

Lastly, conventional bank loans are an excellent option for healthy veterinary practices with strong financial statements and established banking relationships. These loans generally close faster than standard SBA financing and can offer attractive interest rates.

The downside is that banks typically have stricter underwriting requirements. As a result, younger practices may find it more difficult to qualify if they have inconsistent cash flow. Regardless, our team at Granite Peak will always be willing to guide you and make introductions for any of the loan types discussed, based on your individual and specific needs.

Written by Alec Brunelle, CPA