Medical Specialty

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Diversification is a well-accepted principle in the world of finance and investment, prompting such lenders as banks and small business investment companies (SBICs) to spread their risks among different industries. But if specialization is an imprudent way to go, the message doesn't seem to be getting through to Fred Rosemore.

Rosemore's North Miami, Fla., SBIC, Western Financial Capital Corp., has made a large percentage of its loans to health care professionals setting up practice: doctors, dentists, podiatrists, veterinarians, and optometrists.

"I had been an optometrist in Alabama for 32 years, and I had also been involved in a mortgage finance business," explains Rosemore, now 61. "I was getting ready to retire when I was approached by deans of several optometry schools from around the country." They told Rosemore about the difficulties their graduates were having in raising the $40,000 or so needed to equip a new practice; most banks didn't want to lend new practitioners more than $20,000.The deans encouraged Rosemore to form an SBIC that could cater to the early capital needs of optometrists and other professionals, so he set up Western Financial Capital.

Since 1980, Western Financial Capital has made fixed-rate loans (most are for periods of 15 years) to about 250 health care professionals in 43 states -- a portfolio of more than $6 million in capital and funds borrowed from the Small Business Administration. Before approving a loan application, says Rosemore, a panel composed of health, care specialists reviews the application. "Because we understand the various medical disciplines, we offer more than money," he notes. "A lot of these young people starting out don't know very much about business. We provide consulting services so they don't buy more fancy equipment than they need."

Rosemore's targeted approach to lending has been extremely successful so far. "In four years, we've had only one bad loan," he says. So you might wonder why SBA officials aren't encouraging more SBICs to develop lending specialties of their own. The main reason is that a number of attempts to concentrate lending efforts in other areas, such as house building and movie production, have flopped -- and the government has lost its money. As a rule, explains an SBA official, "We don't like SBICs to put all of their eggs in one basket. If diversification is good enough for Lloyd's of London, it ought to be good enough for the American taxpayer."

Western Financial Capital, however, has no plans to become any less specialized, says Rosemore, although he recently formed an affiliate -- First Western Small Business Lending Corp. -- to take a broader approach to the market. At Western Financial Capital, he says, "We've picked a niche we feel we're competent in. And we're helping to stimulate commerce. . . . So why on earth should we go out and lend to bakeries or jewelry stores? We don't pretend to know anything about those kinds of businesses."