Dentists and Vets Provide ‘Recession-Proof’ Loan Growth for Fifth Third

Provide — a fintech focused on making loans to help dentists and veterinarians start, buy or expand their practices — operated independently for years before selling to Fifth Third Bank. But together they hope to deepen relationships with borrowers. One part of that effort is a newly introduced credit card with special features to appeal to healthcare practitioners.

One of the biggest steps for a healthcare practitioner is opening their own practice or buying one. It’s a daunting process not only for them, but for many lenders.

That’s why these types of loans often go to niche players or select banks with specialized expertise in handling them.

Fifth Third Bank now includes itself in that group, after acquiring one of those niche players — a fintech called Provide — in 2021.

Though Provide operates like an independent unit, Fifth Third is finding ways to add more value to its business line. It is expanding the relationships beyond loans, introducing new products and anticipating nearly $1 billion in loan growth for 2023.

Provide works mainly with dentists and veterinarians, a specialty area that Andrew Bennett, the chief business officer for the fintech, says he finds rewarding. Though the general trend in healthcare is toward mammoth group practices, he says many new graduates and younger practitioners are passionate about having their own business.

“Doctors are heavily invested in their practice. It’s their life’s work,” says Bennett. “They went to school for eight, 10 or even more years to get ready. So there’s a tremendous incentive to see it through, and it’s their calling. They’re very committed to their patients.”

Provide Focuses on ‘Practice Lending’ for Dentists and Vets

The bulk of what Provide does is “practice lending,” which enables healthcare providers to start, buy or expand their practices.

This type of financing isn’t for toe-dippers, Bennett says. Lenders either commit to the business or stay out of it, because it’s essential to really understand the market.

Loans for acquiring practices can run $800,000 to over $1 million on the high side, but the average is around $600,000. For the practitioner, this often comes on top of steep student debt.

Plus, “there’s not a lot of hard collateral in a practice,” unless the loan also includes equipment or realty, Bennett says. “Typically, the main value is the book of patients and the goodwill of the practice.”

Bennett thinks this is why many banks avoid financing practices. Such intangible assets are squishy from a traditional business lender’s credit perspective. But these are strong loans, he says.

“Healthcare practice credits are as close to recession-proof as you can get. Folks are still going to take care of their teeth and their pets, even when things may get tight at a macro level.”

— Andrew Bennett, Provide

Dentist and vet businesses tend to be similar all around the country, he adds. So the math of running a practice is remarkably standard. “There are practitioners who are able to run a more profitable practice than others,” he says, “but the variations aren’t enormous.”

Though Provide may expand into other types of healthcare practices in the future, Bennett says it already has sufficient opportunity for growth in the two fields where it operates now.

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How a Fintech Works Inside Fifth Third

Provide launched in 2013 as an independent fintech serving small businesses in general, but shifted a few years later to focus on just healthcare borrowers. It operates a digital platform that onboards prospects in minutes.

Fifth Third was among its early outside investors in 2018. And prior to the acquisition, Provide funded its lending by selling the loans to a handful of bank partners, including Fifth Third. The existing relationship smoothed the way for the eventual purchase.

Now all of Provide’s loans go on Fifth Third’s balance sheet. The bank projects that loan production from Provide will be $900 million this year, bringing its outstandings up to an estimated $2.7 billion at yearend 2023. Provide finished 2022 ranked #2 in national market share in its focus markets, according to Fifth Third’s annual report, which mentioned the potential for much more penetration. (Provide’s staff was at 240 people at the end of 2022, compared with 90 in 2019, pre-acquisition.)

Lending Brings More Business:

Loans are not the full extent of the business Provide generates. Most of Provide’s borrowers wind up banking with Fifth Third. In an analyst presentation Fifth Third indicated that 80% of new Provide relationships bring deposits, treasury management business, or both.

Provide and Fifth Third also have plans to add products that deepen relationships with the borrowers even further. In May, they introduced the Provide Credit Card for owners of healthcare practices, which has 0% APR for the first year. The card has special features that include triple rewards on qualifying dental, veterinary and medical supply expenses. Reward points can be used to pay down the credit card, Provide loans or Fifth Third mortgages, or redeemed for cash back, gift cards, travel and more.

There’s potential for additional lending opportunities via Provide too — examples include buying additional practices to expand the business, upgrading equipment and facilities, or buying commercial real estate, such as the building the practice is based in.

Healthcare banking and investment banking services are a major focus for Fifth Third, representing $5.6 billion of its loan portfolio in 2022. Further activity in healthcare will be coming for the bank in the wake of the proposed acquisition announced in March of Big Data Healthcare, a technology solutions provider for healthcare payments and remittance.

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Provide’s Marketing Effort Is as Specialized as Its Lending

Something that helps a healthcare practice thrive is the quality of the advisory services the doctor in charge has, Bennett says. A practice’s certified public accountant, for example, can make a big difference in how well a practice succeeds. Likewise, there are attorneys and even healthcare practice consultants who play critical roles.

Making connections with these types of professionals helps Provide source new business. Another key source of referrals are healthcare practice brokers.

Beyond that, Provide has set up its own healthcare practice marketplace to list practices that are for sale. It curates these detailed listings — which include asking prices and links — with the assistance of practice brokers.

The site is searchable and includes a feature that will ping would-be buyers when a potential opportunity arises. This is of interest to dentists and vets who want to buy their first practice or expand one they already have. Also included is a section that helps practitioners prequalify.

Provide dental practice for sale listing

The listings in the marketplace include teasers for relevant content on Provide’s site — which is another aspect of the marketing effort. By offering articles and podcasts to educate practitioners about the money side of a practice, Provide positions itself as a resource.

“Typically, they don’t have experience running a business,” says Bennett, “and it is not something that is covered extensively in dental school or vet school. So we try to support doctors as much as we can through that content.”

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‘Bedside Manner’ Applies to Lending to Healthcare Practices

While Bennett speaks of the relative safety of this kind of lending, he says that borrowers new to the idea of acquiring a practice can be overwhelmed. The loan amounts can be intimidatingly large, and the prospective borrowers typically have huge school loans they’ll be paying off for years.

Bennett says the personal debt isn’t viewed negatively at Provide, given that it allowed the borrower to become a dentist or a vet.

Regarding the payback of the practice loan, he says the assurance Provide offers to borrowers is that it has done the homework for them. “It’s important for them to remember that the cash flow analysis we do is to prove that the practice can support the debt,” says Bennett. “If they keep doing what they can do as practitioners to serve their patients, they can make their payments. It’s not going to be a problem.”

Fifth Third services the loans but Provide has teams that continue to work with borrowers through the life of the loan to resolve issues and bring additional services to the relationship.

Provide also works to balance its digital platform with a human element, especially in the loan closing area, to maintain empathy. One of the keys is hiring out of the box, according to Sally Beane, director of closing. She’s an example of that herself. She has a master’s in social work, and before joining Provide spent eight years in family and victim advocacy.

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