Lenders reject practices as good loan prospect
June 1, 2000 2 minutes read
Lenders reject practices as good loan prospect
Health care apparently is risky business
Health care now ranks as one of the most unappealing sectors for banks and other lenders to do business with, reports the Phoenix Lending Survey in Philadelphia. In fact, 85% of commercial lenders say they do not want to lend to a health care provider, finds the latest Phoenix survey. This is the fourth consecutive quarter that health care has led the list of least-attractive industries for lenders.
When it comes to making loans to physician practices, only 45% of commercial lenders said they considered practitioners to be attractive candidates.
"The loan prognosis for health care is grim," says E. Talbot Briddell, president of Phoenix Management Services. "There are very few signs of life among the various sectors that comprise the health care industry."
Providers are out, suppliers in
Besides medical practices, lenders also are disenchanted with managed care companies (named by 55% of respondents as unattractive), not-for-profit hospitals (48%), and for-profit hospitals (45%).
When asked which parts of health care were appealing to their lending institutions, 41% of lenders preferred pharmaceutical companies, followed by durable medical equipment suppliers at 39%.
"The fact that no single sector of the health care industry scored above the 50% level is indicative of the low esteem in which the industry overall is held," notes Briddell.
When asked when they think the current economic boom will quit, 75% predicted it would end before the end of 2001. One-quarter of lenders expect it to halt this year, while half think the bubble will burst during 2001.
An overwhelming 98% of lenders also predicted interest rates would rise again soon.
"What we’re seeing is a restrained optimism about the economy among lenders balanced against an expectation of rising rates, loan losses, and bankruptcies," Briddell says.
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