Case Study: Pets before Profit

Across the nation, veterinary hospitals are adopting payment plans as a way to increase their client base, while realizing added revenue through interest on the payments. For a California veterinary hospital that launched their own payment program two years ago, the objective was simple: help more pets. After being forced to turn away credit-worthy pet owners due to decisions handed down by third-party financiers, this practice decided to take matters into their own hands and put in place a system to approve and finance their own loans.


Of special interest here is the unique strategy this practice followed when it came to their interest rates. Since their ultimate goal was helping more pets, with revenue concerns taking a back seat, they offered most payment plans at exceedingly low interest rates, or in some cases charging no interest at all, based on the customer’s financial situation. Luckily, advanced payment plan software made it easy to customize lending parameters with a few mouse-clicks, so they could easily modify the plan based on the customer’s profile. Across the 120 payment plans signed, the average interest rate shook out to 3.89%, well below the veterinary industry average of 7.78% (according to system analytics performed by Veterinary Credit Plans, based on hospitals with approximately 100 plans in their portfolio).


Remember, the central objective was helping more pets, so charging a fair interest rate just made sense. But what about the risk of loan defaults? Due to their forgiving stance on credit requirements, this hospital did see a 6% default or collections rate, with a default total of $4,545.96. However, over two years, the hospital counted their total added revenue due to new payment plans at $75,434.41.


It’s important to note, once again, that this hospital offered very low or no interest on the majority of their plans, and even accepted many with no down payment. Across the board, VCP reports average default rates are closer to 2%, with total returns averaging 107%. Furthermore, most accounts don’t default from day one, but after making several payments, or near the end of the plan.


Even with a default rate as high as 6%, the added net-new revenue makes this story a clear success. While this hospital could have realized an even greater return with stricter down payments and interest rates, their charitable approach allowed them to open their door to hundreds of pets they otherwise would have turned away.

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