Are You Bankable?
The lending market for veterinarians is ever-evolving, with new banks and lenders looking to enter the market to assist veterinarians with their practice financing needs. In today’s lending environment veterinarians who are best prepared will receive the best financing available. So how do you prepare yourself to apply for a practice loan? It all starts with making yourself “bank-able”.
So, what do you need to do to make yourself “bank-able”? Here are some common things to consider when preparing yourself to get a loan for your practice:
Check Your Credit
This seems pretty basic, but it’s not just about knowing your score. Get a free copy of your credit report each year and review it for accuracy. There are some excellent services (free and paid) to assist you with this but you can also contact each of the credit bureau agencies direct to get your annual free copy. When reviewing your credit report, you want to ensure the following:
- Accounts are accurate: Open? Closed? Delinquency? Balances? Check to make sure the information about your accounts is accurate.
- If something does look amiss you can contact the company to dispute the information. By regulation, the company has 30 days to respond or update your credit bureau in your favor.
- A “Great” credit score if anything over 750
- Scores range from 300-850 (highest I have ever seen is 827!)
- You may have different scores with each credit reporting company so make sure all reports are accurate.
Manage Your Credit Card Debt
The easiest way to effect (positively and negatively) your credit score is carrying or not carrying credit card debt. If you carry credit card debt (not pay it in full each month) you could have a negative effect on your credit score in a significant way.
- Keep Credit Card Utilization under 20% – Utilization is the amount of your revolving (think credit cards) balances versus the amount of credit available. If you overutilize and revolve credit card balances (not paying them off, in full, each month) your score could be dropping 100’s of points depending on the percentage. The higher the percentage of utilization the higher the severity of the drop in your score.
- Pay off Balances each month, when possible.
- If you need to make a purchase that you will need to pay over time choose the card with the lowest rate versus the card with the best points. The money you save in interest is better in the long term versus the miles or cashback you may be receiving.
- Pay down your higher interest rate credit cards first, they are costing you the most money.
Establish a “Rainy Day Fund”
A common issue I have seen, especially with recent graduates trying to become first time owners, is that Veterinarians focus ALL of their excess income towards paying down debt (think student loans) and do not have any cash savings.
While paying off debt should always be a focus, if you are preparing yourself for a practice loan most lenders like to see that you have established a savings account for that unavoidable rainy day. If you have focused all of your excess income towards debt you will need to borrow money on credit cards or private loans when the car breaks down, or the roof has a leak, or the practice has an off month.
Good advice would be, as you are establishing yourself financially (or re-establishing), focus on the rainy day fund and then use some excess cash to pay down those credit cards and student loans.
Live Within Your Means
Finally, live within your means. A few principles to follow to assist you in living within your means:
- Understand your income – How much do you earn weekly, Monthly, annually, and factor in net pay versus gross pay (Taxes).
- Establish a monthly budget –If you start with where you currently spend your money then you can identify places to cut if needed and set savings goals.
- Set savings goals – whether it be for a new car, vacation, or just save some extra money in that rainy day fund, goal setting is key for any financial picture to improve.
- Avoid large lavish expenses and keep yourself financially lean. If you have the big house, the big car, and the big boat then you will need a BIG income to keep up with that lifestyle. If may disqualify you from being able to purchase those “diamond in the rough” smaller practices that have tremendous upside because lenders lend from the current state, not the future.
- Make smart Student Loan decisions – If considering a refinance of your student loans do not just consider the interest rate, also consider the monthly payment. When a lender reviews your information for a loan they focus on your monthly obligations. If you refinanced your student loans to an aggressive payment schedule you could run into issues with your monthly debt obligation to income ratio. Consider longer terms with pre-payment flexibility so when you have excess income you can pay them down or off faster with no penalty.
The market for lending to Veterinarians is robust and competitive. To get the best loans available it all starts with making yourself “Bank-able” and demonstrating yourself to be financially responsible to the lenders you will speaking to. A little preparation and focus on your financial goals can go a long way towards getting the best financing for what you are trying to accomplish.
Bill Murray is the National Sales Director for Lendeavor. A healthcare lending focused fin-tech that lends money to Veterinarians to accomplish their private practice goals. You can connect with Lendeavor by visiting www.lendeavor.com or by emailing Bill at William@Lendeavor.com