Launching a veterinary practice is an exciting step, but one that comes with significant financial demands. From securing premises and purchasing medical equipment to staffing, marketing and day-to-day operational costs, the need for capital can be considerable. New practices often find it difficult to secure funding through conventional means due to limited trading history or a lack of assets.
However, the financial landscape has evolved, and those looking to open up a new veterinary practice have more options than ever.
Of course, there are a number of routes that can be taken, so what follows may not be appropriate to all. However, it is a guide that considers the funding solutions – traditional, alternative and government-backed – that can support a new veterinary practice as it develops.
Finance options for start-ups
Traditional high street bank loans
It’s logical that most begin their funding search by looking for a traditional bank loan. And with high-profile names such as Barclays, HSBC, NatWest and Lloyds offering business loans with various rates of interest – some more competitive than others – and structured repayment terms, it’s a natural source to head for.
As to the benefits, the banks are useful for monies needed for large capital investments, such as premises and surgical equipment. Their fixed interest rate loans and repayment terms can improve budget predictability, and monies can be used for working capital or expansion.
But on the flipside, banks often require at least three years of trading history, expect a comprehensive business plan and financial forecasts, and may demand personal guarantees or security, and the approval process can be lengthy and time-consuming.
For a start-up veterinary practice without an established track record, meeting these criteria can be challenging. This is why many start-ups consider additional or alternative funding sources.
The “challenger” banks
These institutions also tend to be more agile and tech-focused, which may appeal to digitally savvy veterinary entrepreneurs
Challenger banks such as Starling Bank, Tide and Cashplus offer modern digital services that are tailored to small businesses. While they may not offer traditional loans in all cases, they can provide business current accounts with overdraft facilities, integration with accounting software, access to invoice financing (where a business sells the invoice for advanced payment, less a fee) and other forms of credit.
These institutions also tend to be more agile and tech-focused, which may appeal to digitally savvy veterinary entrepreneurs. Further, some partner with third-party lenders to offer loans to newer businesses that may be overlooked by traditional banks.
But while these banks are “alternatives”, they too will demand a business plan, accounts and security – it’s just that they may be simpler to deal with and more open to newer businesses.
Asset-based finance
Veterinary practices naturally rely heavily on high-quality clinical equipment – ultrasound machines, digital X-ray systems, autoclaves, examination tables, diagnostic tools and so on. Asset-based finance allows practices to acquire such items without paying the full cost up front.
There are three types of asset-based funding: hire purchase, where the borrower pays in instalments and owns the asset at the end; a finance lease, where the borrower leases the equipment, but ownership remains with the lender; and an operating lease/contract hire, which is best used for vehicles or equipment that needs frequent upgrading.
There are a number of clear benefits to using this form of finance, namely that it spreads the cost over several years, it offers easier budgeting with fixed monthly payments and equipment may be offset against tax as a capital allowance.
Most asset finance providers will fund 80 to 90 percent of equipment cost, and approval is often faster than for bank loans. However, the equipment serves as collateral, meaning it could be repossessed if payments lapse.
Short-term online loans
As in other parts of the economy, online lenders have become increasingly popular due to their speed, flexibility and accessibility. These lenders often operate via simplified digital platforms to offer short-term business loans, sometimes without the stringent requirements of traditional banks.
There are quite a number of online lenders, but the most popular seem to be Funding Circle, Iwoca, Capify, Fleximize and Love Finance. It pays to search and understand the benefits of each to find the best fit.
In terms of the key features, loan terms typically range from 3 to 18 months; decisions can be made quickly – often within 24 to 48 hours; funds can be used for equipment, marketing, tax bills or bridging cash flow gaps; and they’re more readily available to applicants with thin or poor credit files.
However, the convenience and flexibility come at a price. Interest rates are usually higher, and the short repayment term may put pressure on early-stage cash flow.
Revolving credit facilities
For practices that are likely to have ongoing working capital needs, it may be worth considering a revolving credit facility offering flexibility
For practices that are likely to have ongoing working capital needs, it may be worth considering a revolving credit facility offering flexibility. These work like a business overdraft or credit line – the practice draws on funds when needed, repays them and then draws again up to the agreed credit limit.
Such facilities are useful for managing unpredictable costs or seasonal fluctuations, interest being paid only on the amount used, and are less rigid than a fixed-term loan.
Many online lenders and banks offer revolving credit facilities tailored to small businesses; they are especially handy in the first year when financial unpredictability is at its highest.
Business credit cards
We all know the value of credit cards in our private lives; the same applies to commerce, too. Consequently, they’re ideal for short-term expenses like fuel, office supplies, marketing campaigns or emergency purchases. And the bonus is that many offer interest-free periods (often up to 56 days) and cashback or reward schemes.
The advantages are several: it is easy to manage daily expenses, they can help build a business credit score and some offer large credit limits (up to £100,000 or more).
But there are risks. There are high interest rates if balances aren’t paid in full each month and they can lead to overspending without disciplined cash management.
Business credit cards are available from traditional banks, as well as niche providers such as Capital on Tap, Juni and Payhawk.
Government-backed finance
Another place to look is the Start Up Loans scheme. Backed by the British Business Bank, it is a powerful and often overlooked resource for any new veterinary practice owner. Its strength comes in that it offers unsecured personal loans of between £500 and £25,000 (up to £100,000 if multiple owners apply individually).
The main highlights are a fixed interest rate of 6 percent per annum, repayment terms of one to five years, no personal guarantees required, no application or early repayment fees, free mentoring for 12 months and business planning support.
But to be eligible, the business must be trading for less than 36 months, must demonstrate they can’t access other finance (self-declaration) and must pass a credit and affordability check.
The funds can be used for a wide range of purposes, such as for premises, equipment, hiring or even acquiring an existing practice (under certain conditions). But they cannot be used to fund debt repayment, training, qualifications or education programmes, or investment opportunities that do not form part of an ongoing sustainable business.
Regional and sector-specific grants or loans
Depending on where the practice is based, there may be other routes to assistance through regional development funds or sector-specific grant schemes. At the time of writing, there were 127 schemes, including:
Access to Finance – Greater Manchester and Lancashire which can offer assessments, coaching and introductions to lenders to businesses with up to 249 employees; BCRS Business Loans that offers loans of between £10,000 and £150,000 to businesses in the West Midlands with up to 249 employees; Business Start-up Grant Scheme – Mansfield that helps start-ups with grants of up to £2,500 to those with nine or fewer employees; and Enterprise Answers business loans that can offer loans of between £10,000 and £150,000 to businesses with up to 249 employees in the North West and Yorkshire and the Humber.
Details can be found via the government’s searchable database.
Merchant cash advances
If the practice is to take payments via card terminals – and which practice wouldn’t – a merchant cash advance could offer fast, unsecured funding. With this facility, a lump sum is provided upfront to the practice and repaid via a percentage of future card-based sales.
The process is simple in that there’s no fixed repayment schedule and no need for personal assets as security, and works for those practices with steady card income.
However, it attracts a higher cost of finance and can be less predictable than a fixed loan. Overall, it’s best for practices that are already generating regular card-based revenue.
Private investment or partnerships
Lastly, there’s the option of Dragons’ Den-style funding from angel investors and private equity firms (for larger or specialist practices), as well as money from friends and family and joint ventures with more established vets or business people.
However, while these sources can bring in capital and valuable expertise, they invariably involve giving up equity or shared decision making, so legal agreements and clear expectations are essential. And with friends and family, there’s the jeopardy of what happens to relationships should the business not perform.
Final thoughts
The best approach often involves combining multiple funding sources, for example using asset finance for equipment, a start-up loan for working capital and a business credit card for smaller purchases
Securing the right funding for a veterinary practice is critical to its early success and long-term sustainability. Each option has its own pros, cons, eligibility criteria and costs. The best approach often involves combining multiple funding sources, for example using asset finance for equipment, a start-up loan for working capital and a business credit card for smaller purchases.
But before applying, it’s crucial to prepare a solid business plan, understand cash flow forecasts, assess risk tolerance and, critically, seek legal and financial advice where needed.
The good news? There are countless tools, advisory services and platforms that can help applicants identify the right mix of finance for their specific goals.
