By Evan SparksWarren Meyer, a small business owner in the Phoenix area, called the local real estate lending bubble as early as 2005 when he overheard a dentist telling a doctor about the big profits he was making flipping undeveloped land.
“At Harvard Business School, I had a great investment management class with a professor who has schooled many of the best in the business,” Meyer wrote at the time on his popular Coyote Blog. “If an investment we were analyzing turned out to be a real dog, he would ask us ‘Who do you sell this to?’ and the class would shout ‘Doctors!’ And, if the investment was really, really bad, to the point of being insane, the class would instead shout ‘Dentists!’”
Jokes aside, the need for financial literacy on the part of health-care practitioners is real. According to a study published in the International Journal of Medical Education, on a 20-question personal finance test, the average resident or fellow correctly answered just over half.
The years of post-graduate training and intensive 80-hour work weeks during residencies don’t leave much time for financial literacy—and after residency, many physicians immediately begin making significant sums, which can make them targets for people without their best interests at heart. Moreover, as partners or sole proprietors in private practices, many physicians and dentists face the challenge of running and financing a small business—an added strain they didn’t train for in medical or dental school.
“We want them to be able to take care of their patients’ health as we take care of their financial health,” says Patti Husic, president and CEO of Centric Bank, a $704 million institution in Harrisburg, Pa. Centric Bank operates a division called Doctor Centric Bank, what Husic calls a “concierge approach” to serving this segment.
Under the Doctor Centric Bank umbrella, medical providers receive tailored business banking, lending and real estate financing solutions. One common need: financing buy-ins or buyouts at private practices; for a young provider with a high debt load but lots of earning potential, buying equity in a practice can be a prohibitive burden without help. It could be a “doctor to a practice where we are going outside the box and are financing terms to them [or]a partner, say a dentist who is exiting,” explains Husic. “It’s a way that the company can facilitate the buyout.”
Another common need: equipment finance. Dentists’ chairs, ultrasound machines and high-end dermatology lasers aren’t cheap. Several years ago, Bank Midwest, a community institution in Spirit Lake, Iowa, had some capacity on its balance sheet and developed a sideline that provides equipment loans—with an average ticket size of $50,000—for doctors, dentists and veterinarians in the lower 48 states. The equipment finance arm has brought 6,000 new customers to the bank, chairman Steve Goodenow says, adding that “we are working on strategies to develop and deepen the relationships that we have” and help move these customers into the bank’s other products.
Centric Bank has also seen success with refinancing its customers’ student debt. “There are times we’ve taken that new doctor or dentist’s student loans and been able to refinance some of that debt, knowing that if they’re part of the practice that we’re working with,” she explains—it gets back to that concierge approach. “It’s very much the high-touch approach and the medical community embraces that. They like the continued access outside the banking hours, the texting, the one-call approach.”