For the past couple of weeks, calls have dropped into his office every day, says David Greene, a practice broker based in Colorado Springs, Colo. In contrast to the past, the callers are not interested in buying or selling a practice, necessarily. But, they want to know if veterinary practices are selling and if money is available.
He tells the callers: yes, to both questions.
“It’s pretty much business as usual,” Mr. Greene says. “In general, buyers can still get financing.” Most brokers and lenders are saying the same thing. The economic downturn, and the stock market crash, and the tightening of financial credit has not hit veterinary medicine yet, in any profound way. But the situation is in flux, and uncertainty abounds.
What has changed, in just the past month, is the terms of loans, Mr. Greene says, a statement with which other brokers and lenders who spoke with the VIN News Service agreed.
Fixed interest-rate loans used to be the norm for veterinary practice purchases. But, over the past month, the rates for variable loans have become much more favorable, said Mr. Greene.
Fixed rate, Small Business Administration-guaranteed loans currently have an interest rate in the range of 8%-10%, and that is up from interest rates of about 7% just a month ago, Mr. Greene said. The variable rate loans currently have an interest rate ranging from 1%-2% above the prime rate, which during the month of October has been about 4.5%.
Earlier this summer, there was a definite drop-off in the buying and selling of veterinary practices, Mr. Greene said. But now the activity has picked up again.
“As far as business is concerned, I would say people are still looking to buy,” he says.
Doyle Watson, DVM, says that the banks are still making money available for veterinary practice purchases because the business is historically a good risk for bankers. Veterinary practices traditionally only default on their loans one time out of one hundred. And, it appears that so far most practices are weathering the downturn.
“Most practices that are working hard are growing,” says Dr. Watson, the president of Simmons and Associates, Inc., a nationwide practice valuation and sales firm.
While there is uncertainty about whether loan money will continue to be available in the coming months and the direction interest rates might take, “the demand for selling on the sellers’ side has not been impacted and the demand for buying has not changed,” he says.
Overall, the number of loans granted for small businesses in the U.S. appears to be down about 30% on the year, says Mark Edwards, president of the SBA Group at Branch Banking and Trust, Atlanta. But, his bank has capital for loans for veterinary business, and is fairly confident about the near future.
“There are lenders, like us, that are still well capitalized,” he says. “There have been pockets where we have probably seen more practices have issues with repayment. But there are strengths in the banking industry and there is strength in large pockets of the veterinary industry.”
Vince Dailey, a senior loan officer with North Carolina-based Live Oak Bank, a bank that was founded to fund veterinarians, says he thinks applications for veterinary loans have fallen off slightly in recent months, but only because some are uncertain and are waiting.
“Everybody is becoming a little more cautious,” he says. “I think if anyone watches the news it makes them very nervous right now.”
The near future is uncertain, Mr. Dailey says. But lending for the veterinary business is not going to be hampered by a lack of available capital. Rather, the ability of veterinarians to secure lending is going to depend on how well the industry and practices perform in this economy.
So far, the veterinary industry seems to be faring well in the downturn. Although many veterinarians believe their clients are holding off on services, the hard numbers that are available suggest the industry is rather robust.
“It just depends on how the consumer holds up here,” Mr. Dailey says. “I think people might just be a little tighter for awhile.”