Stable Industries, No. 1: Veterinary Practices

Where SBA loans fail less often, one industry at a time. A series for acquisition entrepreneurs, built on SBA's loan-level 7(a) servicing data.

Data in partnership with Ink, which underwrites Personal Guarantee Insurance for SBA borrowers.

The short version. Of every industry that borrows often through SBA 7(a), veterinary practices default the least. Since FY2017, 0.64% of outstanding vet loans have defaulted each year, against 2.75% across the program. Follow a group of vet loans for a full decade and 4.00% go bad, against 11.67% of all 7(a) loans. Acquisition loans, the kind a searcher takes, are consistent with that record: two defaults among the 147 vet acquisitions followed for three years. Lenders appear to recognize the industry's strong repayment record and price vet loans accordingly. When vet loans do fail, the defaults cluster in year three. The loan data cannot say why, but our leading concern for buyers is dependence on the veterinarian.

Every edition in this series opens with the same four figures, so you can compare industries as the Playbook grows. The first two are the share of outstanding loans that default in a year, pooled over the decade and over the recent period. FY2026 is partial in both, running through April 2026. The third follows a group of loans for a full ten years. The fourth is what the defaults cost.

A default here is the moment SBA's records show a loan going into liquidation, SBA buying its guarantee back from the lender, or a charge-off, whichever comes first. It is earlier and broader than a charge-off. The method is at the end.

The gap holds against the businesses vets are usually compared with. Dental practices, the standard benchmark for a steady professional practice, came in at 5.41% over ten years. Physicians came in at 8.75%. Vets sit below both.

Defaults have risen across the whole 7(a) book since 2023, and vets have risen by roughly the same proportion. Against the pre-pandemic years (FY2017 to FY2019), the book's recent rate is up 1.50x and the vet rate 1.31x. The difference is the base: a move from 0.64% to 0.86% is two-tenths of a point, built on a few dozen defaults a year, so a handful of loans in either direction moves it. We read it as a watch item, not a trend, until more years accumulate.

The loan tape tells you that vet loans default at roughly a quarter of the book's annual rate, and about a third of its ten-year cumulative rate. It does not tell you why. The rest of this piece offers four possible explanations and one major risk the loan data cannot measure.

Demand is recurring and paid at the counter. Americans spent $41 billion on veterinary care and product sales in 2025, up 3%, within a $158 billion pet economy that the American Pet Products Association expects to reach $165 billion in 2026. Our read is that veterinary care sits closer to a household necessity than a discretionary purchase, and the default record is consistent with that. Just as important, a vet clinic collects most of its revenue directly from the client at the time of service. There is no payer to deny the claim, no reimbursement schedule to reset, and no 90-day receivable to finance. The revenue a buyer underwrites is close to the cash the practice actually collects.

The license limits supply. Nobody can open a competing clinic without a licensed veterinarian willing to practice in it, and a credential is a slower thing to add to a market than a building. Compare that with the express car wash corridor, where three new tunnels can open inside a five-minute drive in a single building cycle. A vet practice's trade area is protected by a license, and our read is that the protection shows up in the default rate.

Real estate is usually in the deal. Close to half of recent vet loans finance a clinic and its real estate together, and one in three vet acquisition loans carries a 25-year term, which 7(a) rules reserve for loans where real estate is the main use of proceeds. The lender holds hard collateral, and an owner who buys the property gains control over the premises, although financing costs, taxes, insurance, and maintenance can still change. The outcomes line up with that: vet loans of $1 million and up, which are mostly real-estate-backed, defaulted at 2.72% over ten years, against 4.65% for loans under $150,000. That is a correlation, not a law of nature. Our read is that it reflects the real estate, the lender's selection, and the borrower's capacity more than loan size itself, but the direction is the opposite of what most buyers assume.

Lenders compete for these loans and price them that way. The median vet loan approved in FY2025 was priced 0.67 points over prime. The median 7(a) loan was priced 2.75 points over. Vet acquisition loans came in at 0.62 over prime against 2.00 for acquisition loans across the program. Two points of rate on a million-dollar balance is roughly $20,000 a year of interest, and that saving is itself a cushion against default. The pricing is both a signal of how lenders see the industry and part of the reason the record stays clean.

The one thing the data can't see is the doctor. Everything above describes the clinic. None of it describes the veterinarian who produces the revenue. More on that below.

SBA began marking loans that finance a change of ownership in FY2018. Since then, it has marked 178 vet loans as acquisitions, roughly one vet loan in ten. The rest are existing practices borrowing to expand, refinance, or buy their building, plus a smaller number of true startups.

The acquisition loans are the big ones. Their median since FY2018 is $847,500; in FY2025 it was $1,148,750, with 56% at $1 million or more. The practice being bought had a median of eight employees at application. A vet startup, for comparison, had two.

Of the 147 vet acquisition loans followed for three years, two defaulted, a rate of 1.36%. All 7(a) acquisition loans ran 3.96% over the same window, and all other 7(a) loans 6.19%. Two defaults in 147 is a small sample: the 95% confidence interval runs from about 0.2% to 4.8%, which technically includes the program-wide acquisition figure. So treat the acquisition cut as corroborating the industry's record, not establishing it. The thesis rests on the full population of vet loans above, and the acquisition loans are consistent with it.

One general point stands regardless: across the whole program, acquisition loans default less than other 7(a) loans. Vets sit at the bottom of that already-lower group.

NAICS 541940 covers licensed veterinary practices: general companion-animal clinics, which are most of it, plus emergency and specialty hospitals, equine and mixed-animal practices, and mobile vets. The loan data can't separate the dog-and-cat clinic from the horse practice. What it can show is the shape of the deals.

These are small businesses. The median practice taking a standard 7(a) loan had five employees when it applied. Even among loans of $1 million or more, the median was five. Even a $2 million vet loan may finance a one- or two-doctor clinic and its property, rather than a large veterinary hospital.

Franchises are almost nonexistent in the SBA veterinary loan data. Of 4,667 vet loans approved from FY2010 to FY2022, 0.1% went to a franchised business, against 5.0% across all 7(a) lending.

And the typical loan has not gotten bigger. The median vet loan was $611,850 in FY2019 and $636,450 in FY2025, up 4% in six years, while the median 7(a) loan rose 25%. The top end has grown, driven by real-estate-backed and multi-doctor deals, but the middle of the market has not run away from the independent buyer. Volume is recovering too: lenders approved 312 vet loans in FY2025, worth $428.7 million, the most in any year since at least FY2010.

Corporate groups have been buying veterinary practices for years, and they are the competition you will meet at the table. They don't appear in SBA's loan data, but it does say that the independent buyer's financing, the 7(a) loan, has not inflated at the median. Our read: consolidators may provide independent owners with additional exit options, although the loan data cannot establish whether that contributes to lower defaults.

Geographically, vet lending is spread across the country. Florida, California, and Texas led FY2023 to FY2025, but together they hold only 29% of the loans. You do not need to move to one market to find a practice, and no single regional economy drives the outcomes.

A clean credit record is a statement about the past, and about lenders. It is not a promise about the equity returns of the next buyer. Three pressures are visible right now.

Visits are falling even as revenue grows. IDEXX, whose diagnostics run through most U.S. clinics, reported that U.S. same-store clinical visits declined an estimated 1.3% in the second quarter of 2026, with wellness visits down roughly 3% and the company expecting similar declines through the second half. Industry revenue is growing despite softer visit volumes, supported by price increases and more revenue per visit. A buyer who underwrites continued price increases on a shrinking visit base is underwriting a trend with a limit.

The doctor is the cost, not just the risk. Veterinarian compensation and recruiting are the largest lever in a clinic's P&L, and the corporate groups competing for the same associates have deeper pockets. A seller's margin built on an underpaid long-tenured associate does not survive that associate's next offer.

Concentration cuts both ways. The same features that make vet loans safe for lenders, a licensed owner-operator and a protected trade area, mean the equity value is concentrated in one or two people. That is the tension in this industry: it can be remarkably safe for the bank while becoming harder for the buyer to earn a return on, if the buyer pays for the credit record rather than the cash flow.

The default data is low, but it is not shapeless.

Across all 7(a) loans, 24% of defaults happen in the first two years. For vets it is 17%, and then year three alone accounts for 26% of vet defaults, more than the first two years combined. (These are shares of the defaults that occurred, not the odds of default for a loan reaching each year, which would require the count of loans still outstanding year by year.)

The loan data cannot say why year three. It cannot see veterinarians, their contracts, or when a seller stopped practicing. What it can say is that observed veterinary defaults are concentrated in year three. Whether that pattern holds specifically for acquisitions remains an open question. Our leading hypothesis, and the one buyers can actually act on, is doctor dependence: a seller's transition ends or an associate leaves, exposing how much of the practice's revenue depends on one person.

Plan for year three, not just closing day. Keep the seller on through a two- to three-year employment agreement, and pair it with a non-solicit and a non-compete to the extent your state enforces them; several states limit or bar non-competes, so have counsel draft for the jurisdiction. Keep a cash reserve through year three, particularly if seller transition or associate retention remains uncertain.

Underwrite the doctors, not just the clinic. Before you sign, know each DVM's production, each associate's contract and notice period, and your plan for the day the seller stops practicing. If you are not a veterinarian, confirm your state's rules on who may own a practice and what clinical leadership it requires. Several states restrict non-veterinarian ownership outright, and others require a licensed veterinarian in a designated supervisory role; the common workaround is a management-company structure where the buyer owns the non-clinical assets and a licensed vet owns the professional entity. That structure needs counsel, and it needs to be real rather than cosmetic, because regulators look at who actually controls clinical decisions.

Don't fear the building. A practice with its property is the version of this business lenders like most, and the large, real-estate-backed loans have the cleanest record in the data. Our guide to SBA loan collateral covers what you pledge when real estate is in the deal.

Shop the rate. If you are quoted bank-standard SBA pricing on a vet acquisition, get a second quote. Lenders who know this industry price it below two points over prime, and the spread is worth real money over a 25-year term.

Rare defaults can still be expensive. When a vet loan does default, losses can be substantial: the veterinary loans that were charged off lost a median 71% of their original principal. The industry's advantage is its low observed default frequency, not necessarily lower loss severity. Your personal guarantee is just as real here. Size the loan to the practice's cash flow, not to the industry's reputation.

Use loan sizes as a financing benchmark, not a valuation. The typical 7(a) vet loan has been about $600,000 to $640,000 since 2019, and the typical acquisition loan about $850,000 to $1.15 million. Those figures tell you what lenders are financing, not what buyers paid or at what multiple; loan size also reflects equity, seller notes, working capital, and real estate. Value the practice on normalized, doctor-adjusted cash flow and comparable transactions, and then test DSCR on the practice's own historical numbers, because that is what the lender will test.

Next in the series is the industry EBIT Community members ask about most. If there is one you want run through this same data first, reply to any newsletter and name it.

This is the row veterinary practices add to the Stable Industries Playbook. The full row, with the additional cuts behind each figure, lives in the Playbook itself.

What is the SBA loan default rate for veterinary practices?

From FY2017 through April 2026, 0.64% of outstanding 7(a) veterinary loans defaulted each year, against 2.75% across the whole 7(a) program. Over a full ten-year horizon, 4.00% of vet loans made from 2010 to mid-2016 defaulted, against 11.67% of all 7(a) loans.

Can you buy a veterinary practice with an SBA loan if you are not a veterinarian?

It depends on the state. Several states restrict non-veterinarian ownership, and others require a licensed veterinarian in a supervisory role. Buyers in those states typically use a management-company structure in which the non-veterinarian owns the non-clinical assets and a licensed veterinarian owns the professional entity. Confirm the rules with counsel before you go under LOI.

How big is a typical SBA veterinary acquisition loan?

The median vet acquisition loan since FY2018 is $847,500. In FY2025 the median was $1,148,750, with 56% of acquisition loans at $1 million or more. One in three carries a 25-year term, which 7(a) rules reserve for loans where real estate is the main use of proceeds.

A loan counts as defaulted on the first of three dates SBA records: transfer to liquidation, SBA's purchase of its guarantee, or charge-off. The annual default rate is the share of loans outstanding at the start of a fiscal year that default during it, pooled over FY2017 through April 2026 for the decade and FY2023 through April 2026 for the recent period; the final months of available data are left out because SBA revises recent dates, so FY2026 is partial in both figures. The ten-year rate follows every loan disbursed from January 2010 through mid-2016, each for a full ten years from its own disbursement date, using records through July 2026. Acquisitions are loans SBA's public loan file marks as a change of ownership, which it has done since FY2018. Industry codes are translated to NAICS 2022 using the Census Bureau's concordances.

Disclaimer: This guide is for educational purposes only and does not constitute legal, financial, tax, or investment advice. Business acquisitions involve significant risks, and outcomes can vary widely based on individual circumstances. Always consult with qualified professionals including attorneys, CPAs, and financial advisors before making acquisition decisions. The EBIT Community does not guarantee the accuracy of information provided or the success of any acquisition strategy. Past performance and examples do not guarantee future results.