VeterinaryLoans.com

Years ago it was the only way to get financing on the veterinary practice, with some financing available on real estate with a sizable down payment.  In the glory days (1998-2002) buyers could expect 100% financing on the practice and often on the real estate too.  Rarely did buyers use down payments in excess of $25,000.  Times have changed.  Even in high   (profitable) practices, some lenders are requiring owners to provide partial financing.  Siting they want the seller to still have some skin in the game.  Practices succeed or fail after sale based upon the buyer’s abilities, not who holds the paper.  Having sellers finance part of the transaction makes sense in tight cash flow deals or those with unique circumstances however the current trend from major banks seem to be more of an objective passed down from the boardroom limiting exposure than a creation out of necessity.   Be aware that some sellers can’t (need to pay of existing debts) or won’t (no tolerance for risk) carry money back on the purchase.  This means higher down payments for buyers.

SBA Program Authorization Extended to JULY 31, 2010
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By a voice vote, the US House of Representatives on April 27 passed a temporary authorization of the SBA programs whose authorization was set to expire on April 30, 2010. The new extension authorizes the loan programs through July 31, 2010.

SBA Recovery Act Provisions Extended to April 30

Keith Merklin of Live Oak Bank shared the following important SBA news from Naggl.org:

Yesterday new legislation was introduced and passed by the House of Representatives (HR 4938), followed late last night by approval in the Senate.The measure (HR 4938) that extends the Recovery Act SBA loan provisions through April 30: Up to $40 million is available for 7(a) and 504 fee reductions/waivers and the 90% 7(a) guarantees, as well as extension of SBA’s authority to provide the higher guarantee (up to 90%). 

NAGGL expects President Obama to quickly sign this legislation into law.

Details for interested parties:

The source of the $40 million is funding for 7(a) guarantees which was included in SBA’s regular appropriation (thus no budget problem). Specifically, the Consolidated Appropriations Act of 2010 (enacted 12-16-09) provided SBA appropriations for FY 2010. This included $80 million for 7(a) subsidies.  This appropriation has now been expanded to permit SBA to use up to $40 million for fee reductions and the higher 7(a) guarantees, in addition to the sunset on the guarantees being extended.

NAGGL will keep members updated as more news is available about this and all pending legislation affecting the 7(a) business loan program. Visit naggl.org regularly.

The Emerging Trends in Real Estate 2010 study*, released earlier this month by PricewaterhouseCoopers LLP (PwC) and the Urban Land Institute (ULI), says commercial real estate property values have dropped 40 to 50 percent on average from 2007 market peaks, making 2010 and 2011 the opportune time for small businesses to buy at or near cyclical lows. The survey data also suggests that investors believe capital will slowly begin to flow back into commercial real estate markets by the end of 2010.

The commercial real estate property market recovery will mostly likely begin to gain traction before 2012. Long-term confidence holds for the following areas (click to read more).

In recent months congress has pressured banks to increase lending to small businesses in order to spur job growth. Despite President Obama’s missed predictions like his early pledge that unemployment wont hit double digits, the economic decline is just now starting to show signs of recussitation as a result of many factors including perhaps the largest stimulus injection in history.  Now, a long-awaited program approved in the stimulus package back in February 2009 is finally set to begin, albiet almost a year later, that could help make that happen by reassuring wary bankers with a new approach.

For the first time, the Small Business Administration will guarantee up to $3 billion in pools of banks’ 504 loans sold into the secondary market. Some lenders like CIT have historically packaged up groups of loans then sold them in the secondary market.  When that market dried up in the fall of 2008, CIT hit the wall.  Its taken a number of months to get going again, and a good part of the delay is finding buyers for the loans.  Fear of failure of the borrowers in the packaged loans has reduced demand signficantly.  The SBA is now going to guarantee 504 loans in the secondary market. That way, if borrowers fail to pay, investors who bought the loans would be made whole by the government. Hayley Matz, spokeswoman for the SBA, expects the program to start soon but doesn’t have a firm date. 504 loans give small businesses favorable financing to invest in fixed assets like property or machinery.  Veterinarians commonly use 504 and 7A (another SBA loan type) loans.

Commercial lenders have not been able to sell their portions of 504 loans since investors lost their appetite for asset-backed securities in the financial crisis, prompting many lenders to drop out of the 504 loan program. “In essence that market has not returned,” says Kurt Chilcott, CEO of San Diego-based CDC Small Business Finance, a nonprofit that partners with commercial lenders to make 504 loans. “We’ve gone from at least half a dozen active players who were willing to purchase those loans to maybe half a player,” he says. Because banks can’t resell their loans, Chilcott estimates that 40% of the banks his firm used to…. read more

Story adapted from Businessweek article by John Tozzi, and others.

Depending upon the geographical location, species served, and practice type owners are reporting varied financial success in 2009.  The industry itself is expected to grow by 9% annually and exceed $34 billion by 2013 according to Packaged Facts, a research firm from New York.  Some practices report a drop of over 5% in revenue, but data from 120 hospital in Veterinary Metric’s database indicate revenue from January thru may 2009 versus 2008 was down 2% and wellness revenue down only 0.3%.  Research conducted by GattoMcFerson CPA’s show California general “day” practices have increased 2009 revenue (price increase adjusted) although speciality and emergency practices have shown declines.

Practice with the strongest success report wellness testing, nutritional sales and elective services have increased in part due to more time to discuss options with clients since appointments have been reduced.  Good communication leads to understanding and compliance.  These factors are driving profits in practices that take advantage of good marketing, management, client education in addition to the practice of good quality medicine.

Obama unveils reform plan. President Obama announced a plan to revamp financial industry regulation and prevent firms “too big to fail” from collapsing. The plan would make the Federal Reserve the chief watchdog over big banks, insurers and other major financial firms, police hedge funds and private equity funds, replace the Office of Thrift Supervision with a National Bank Supervisor, and create a new agency to regulate credit cards and mortgages.¹

Housing starts leap 17%. They increased by 17.2% in May - and permits for single-family homes were up 7.9% last month, making it the best month in that category since November.²

Energy prices push down CPI. Across the 12 months ending in May, the Consumer Price Index fell 1.3%, the biggest year-over-year drop since 1950 and mostly due to declining energy prices. CPI did rise 0.1% in May; core CPI was up 1.8% last month.³ PPI rose 0.2% in May, as energy prices climbed 2.9%.⁴

For more details go to www.capwestsec.com

Common Mistakes Loan Seekers Make

Those who undertake the historically daunting quest of securing veterinary financing for their practice tend to face similar roadblocks.  Understand the common mistakes made by veterinary loan seekers and you will be well on your way to avoiding these inconveniences and on your way to securing a fair loan with great terms.

Common mistakes include:

• Taking the first good pitch at face value.  As a veterinarian, your primary objective is likely to receive financing as soon as possible, with little time invested.  After all, animals and owners in your community need your services.  However, it is not in your best interest to open up the yellow pages, select a financier and immediately take an offer.
• Assuming all veterinary practice financing is the same.  Just as there are lenders that specifically understand our industry, there are others who could don’t understand how you plan to grow your practice into the future.  Some brokers are merely go-betweens for loan companies and are only looking for an initial commission payout.
• Selecting a non-qualified vendor.  If you find that securing a loan for your practice is difficult to finance, it may be tempting to accept any and all terms.  However, history is full of vets who do so and are faced with varying interest rates and delays regarding loan approval.  In the worst case scenarios, the lender may lose all sources of funding.

Avoid the common mistakes when seeking veterinarian financing.  Trust Veterinaryloans.com to prequalify lenders and match you with the veterinary practice financing that best fits your needs.

Conversations today with Bank of America and Live Oak Bank confirm that there is a substantial increase in buyer demand for practices, however there are less practices being listed for sale.  Industry experts concur that much of the supply and demand issue in 2009 is a result of practice owners retaining ownership longer as a result of the impact of the economy on their retirement portfolios and real estate investments.  It is expected to continue through the 4th quarter of 2009.