December 15, 2008


 Economy affects financing, but practitioners still can borrow

Posted Dec. 1, 2008

Financing remains available for veterinary practices even though the economic downturn has prompted many banks to tighten the standards and terms of loans to businesses as well as households.

The Small Business Administration reported a drop in SBA loans through commercial banks from 2007 to 2008, for the fiscal year ending Sept. 30. Approvals for 7(a) loans, the most common SBA loans, decreased about 30 percent from fiscal 2007 to fiscal 2008. Approvals for 504 loans, for major fixed assets such as land and buildings, decreased about 17 percent.

An October survey by the Federal Reserve of senior loan officers at large banks found that about 75 percent of U.S. banks tightened lending standards in the preceding three-month period on commercial and industrial loans to small firms. Respondents also reported tightening the terms of such loans.

"Almost all domestic and foreign respondents pointed to a less favorable or more uncertain economic outlook as a reason for tightening their lending standards and terms on C&I loans over the past three months," according to the report.

Only 5 percent of U.S. banks reported a reduction in demand for C&I loans from small firms, but 55 percent reported a drop in demand for commercial real estate loans from all firms. About 85 percent of U.S. banks tightened lending standards on commercial real estate loans.

"In these trying times, getting a bank to loan you money is hard, at a minimum," said Chip Mahan, chairman and chief executive officer of Live Oak Bank, which lends almost entirely to veterinarians. "Live Oak Bank focuses on financing veterinarians, though, because they tend to be creditworthy."

David Lucht, Live Oak president and chief operating officer, said the bank approves about 10 practice financing packages per month. He said the pace has been pretty steady ever since the bank started making loans in May 2007.

The economic downturn has not discouraged Banc of America Practice Solutions from increasing outreach to veterinarians this year.

"We're as committed today to the veterinary market as we have ever been," said Cole Gillespie, regional sales director and lead on the veterinary initiative.

Gillespie said current interest rates are not prohibitive for loans to start a practice, expand a clinic, or buy equipment.

Matsco, a Wells Fargo Bank company, also continues to offer financing for veterinary practices. Keith Merklin, Matsco vice president of SBA lending, said veterinarians have fared well during good and bad economic situations in the past.

Merklin added that he understands concerns from borrowers about the stability of banks after the failure of a number of large institutions.

"The key is connecting with a lender that has positioned itself to do well during good and bad times," Merklin said.

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