When Dr. Deborah Rodriguez was ready to buy a practice, she started looking for financing even before she found a clinic.
The Florida small animal practitioner talked with multiple banks before deciding a bank that focused on loans to veterinarians was the right fit. Dr. Rodriguez said the loan officers at the bank she chose, Live Oak Bank, made her loan application painless.
"They took my hand, and they led me through the whole process," she said.
A number of lenders now cater to veterinarians and other medical professionals who want to buy a practice—or to start, build, equip, remodel, relocate, or add a practice. Lenders say veterinarians are particularly creditworthy and the demand for veterinary services remains strong, despite the economic downturn.
To attract veterinarians, lenders offer special financing options—often including 100 percent financing and graduated payment plans. They also share their expertise in the business side of veterinary practice with borrowers whose expertise is in the medical side.
Live Oak Bank is not the only national lender targeting veterinarians. Among the others are Banc of America Practice Solutions, a subsidiary of Bank of America, and Matsco, a Wells Fargo Bank company. These three lenders provide a variety of loans, such as the type of loans that the Small Business Administration guarantees.
Live Oak Bank
Live Oak Bank, the newest of the three lenders, has headquarters in Wilmington, N.C. Chip Mahan, chairman and chief executive officer, said the bank lends almost entirely to veterinarians.
Mahan said his interest in the veterinary profession started with his stepfather, Dr. Robert W. Copelan.
"I met Bob Copelan right after my father died in the mid-'60s, and as a child became a bit enamored with the veterinary business," Mahan said.
Last year, Mahan decided to draw on his own background in banking to offer financing for veterinarians. He said other banks like to lend to physicians, but physicians face issues with malpractice lawsuits and reimbursement from health insurance plans.
David Lucht, Live Oak Bank's president and chief operating officer, added, "We are seeing increases in the price of services supplied by veterinarians—in our view, more in line with the value they bring to us as consumers—and that growth in revenue has been occurring over a number of years."
Live Oak Bank's typical loan is an SBA 7(a) loan for about $1.3 million to a one- or two-veterinarian practice.
The 7(a) loan is the most common SBA loan. To encourage lending by banks to small businesses, the SBA guarantees about 75 percent of the loan amount against default by borrowers. Loans must meet 7(a) criteria, though, including limits on interest rates and total loan amounts.
Lucht said the 7(a) program provides a low penalty for prepayment and also allows Live Oak Bank to offer loans over periods as long as 25 years. With SBA backing, the bank is willing to finance a higher percentage of a transaction. The advantages of SBA loans help offset the accompanying fees and paperwork, Lucht said.
Also, Live Oak Bank has created a Web portal that allows applicants to upload much of the paperwork.
Banc of America Practice Solutions
Banc of America Practice Solutions, an AVMA affinity partner, has reached out to veterinarians this year by dedicating regional sales managers to the profession.
The lender provides a range of financing options for medical practitioners— physicians, dentists, and veterinarians. The company began tailoring loans to veterinarians several years ago, and AVMA members can receive a reduction in administrative fees.
Cole Gillespie, a regional sales manager and the lead on the veterinary initiative, said the market for veterinary services is growing with the increasing sophistication of veterinary medicine. Even in a tough economy, he added, veterinary care is still a top priority for pet owners.
Banc of America Practice Solutions does not offer SBA loans, partly to maintain flexibility in financing options. Gillespie said the lender can match veterinarians with one of multiple options.
"We'd like to think we have a specific product to accommodate them," he said.
A regional sales manager can meet face to face with a veterinarian to discuss goals and budgets. Gillespie said the salespeople have the experience to offer options that are unfamiliar to many applicants. The applicant might be seeking financing for the first or second time in a career, Gillespie noted, while the salesperson might be working on the second loan of the day.
"Veterinarians, similar to dentists and to doctors, don't get a lot of academic training in business," he said. "They're very gifted clinically, but they don't get exposure to the business aspects of running a clinic."
Gillespie said financing options at Banc of America Practice Solutions include 15-year loans of up to $5 million for buyouts, relocations, and second clinics. The lender has loans of up to $200,000 for purchasing equipment and has 25-year loans for purchasing buildings.
Matsco, a Wells Fargo Bank company, has been financing veterinary practices since 1998 and offers preferred rates to members of the American Animal Hospital Association. The Emeryville, Calif., company also lends to dentists, ophthalmologists, and optometrists.
Keith Merklin, Matsco vice president of SBA lending, said the company provides SBA and conventional loans. He said Matsco generally uses SBA loans for real estate and large practice acquisitions. The company uses conventional loans for start-ups in lease spaces, small practice acquisitions, and debt refinancing. Often, the bank combines conventional and SBA loans to meet the borrower's needs.
Matsco offers SBA 7(a) and 504 loans, the latter of which provide financing specifically for major fixed assets such as land and buildings. An SBA loan for real estate is actually similar to a traditional mortgage, Merklin said, aside from some additional fees and paperwork.
"A lot of times, SBA gets a bad reputation for being a lengthy process, which it's truly not," he said.
Banks that offer SBA loans for real estate usually require a down payment of just 10 percent because of the government backing, Merklin said. A traditional mortgage requires a down payment of 20 percent to 30 percent.
Matsco has helped veterinarians build hospitals, purchase practices and real estate, buy commercial buildings that housed their practice, refinance mortgages, and take equity out of their practice for retirement. To apply for a loan, a veterinarian starts by calling a regional financing officer or sales manager.
Matsco lends to veterinarians for some of the same reasons as other banks. Merklin noted that veterinary practices are cash businesses, without much reliance on health insurance plans for payment.
Merklin added, "Veterinarians have historically had some of the lowest default rates of any small business in America."
Closing the deal
Live Oak Bank, Banc of America Practice Solutions, and Matsco are not the only companies that offer financing for veterinarians. Practitioners also can turn to local lenders or other national banks.
Dr. Rodriguez did talk with a local lender before deciding on Live Oak Bank. After securing financing, she spent months looking for the perfect small animal practice.
She finally bought out the owner of Animal Health Associates in Brooksville, Fla., late last year.
"The scariest part for me, when I got in here, was wondering if I was going to be able to take home money for myself," Dr. Rodriguez said. "But we've been doing fantastic, despite the economy not doing so well."