Financial experts, bankers, government officials, and politicians agree: The American economy's in trouble. Banks offered
home loans to thousands of buyers who couldn't afford the payments. Homeowners began to default; banks began to foreclose;
inflated home prices began to plummet. And that's the housing crisis in a nutshell.
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Now for the credit crunch. The shady home loans were bundled as securities and sold to investors who are now swimming in the
incurred losses. With no more selling of subprime mortgages to gain capital to lend, banks are tightening the strings on their
emptying purses, and Wall Street is reacting with plunging stock prices. Congress has passed a bill allocating $700 billion
of relief to grease the wheels of commerce, but at press time, businesses were still finding it difficult to secure credit.
So what does this mean for you? All the implications for veterinary practice aren't yet clear, but it seems that the crisis
could affect business lending. Barring a serious recession that will hit everyone in the nation regardless of profession,
veterinarians are most likely to feel the bite when they're ready to purchase equipment or to buy, sell, or build a new practice.
Who will lend to them when banks are short on capital?
The bottom line
A regional bank in California recently froze all lending for a month or two—which swept at least one veterinary practice into
its wake, says Tom McFerson, CPA, a partner at Gatto McFerson in Santa Monica, Calif. "Frozen credit could be a wave starting
to happen," McFerson says. "Two years ago, fairly decent credit and cash flow made for a slam dunk with banks. Now it's harder."
Despite a few grim examples, most Veterinary Economics Editorial Advisory Board members and representatives from major veterinary lenders think deals will get done. Veterinarians
remain an excellent credit risk, with one of the lowest default rates in the nation. Yes, smaller banks without veterinary
expertise may balk at lending to veterinarians, whose collateral entails credentials and clientele, not cash and houses. But
lenders who work regularly with veterinarians say that credit is still flowing.
Sellers are signing on
As recently as October, banks were still lending to veterinarians—even with the credit crunch and Wall Street troubles all
over the news, says Veterinary Economics Editorial Advisory Board member Gary Glassman, CPA, a partner at Burzenski and Co. in East Haven, Conn. Banks have let go
of marginal transactions, where practice profits would barely cover the cost of the loan, but viable proposals still receive