Dr. Zwade Marshall discussed how his team at Doc2Doc help physicians access capital quickly and cost effectively
|I think your background is more unique than others. How is your experience wearing different heads? You are a physician by training, but you are also an entrepreneur. You have an MBA. Tell us a little bit about it, you have a pretty interesting combination of backgrounds.
|I think it’s invigorating and somewhat satisfying to be able to scratch that both sides of my brain. I went to medical school to serve people, to be a servant, to heal. I have a thriving, interventional spine practice that has grown over the course of the past 2 and a half years since. We now have north of 25 employees and a talented, a new physician, that train at Harvard as well, that ‘s joining our team, and so I get a lot of satisfaction of seeing that business grow, the medical business grows. But then there is something about recognizing a problem within the marketplace, and that problem is the mismatch between risk and pricing for doctors as they borrow money and devising a solution around it with my co-founder. and then building a company with people that know so much more than we do about lending. Our CFO is a former Bank of America, Merrill Lynch, managing partner and built a career for over 20 years at Merrill and handled 50 billion dollar portfolios of syndications and buy-sell agreements. That’s impressive, but it certainly it’s 50 million, not 1 billion. And but we’re growing at a brisk clip as well. And so the challenge of leading teams of highly talented professionals that know more than I do, and keeping them inspired and motivated and paddling their oars all in the same direction. Upstream has been quite rewarding, and at times it can be frustrating. You know it’s level setting expectations and getting to a place of navigating macroeconomic challenges, knowing what a rising rate environment does to the cost of capital, and to the demand curve as well and continually innovating, so that we’re delivering on our promise to really demonstrate value to our members. And so it’s it’s always being cognizant of our mission and our purpose in that we do intend to offer tailored tools to doctors to fulfill their financial goals
|Tell us a little bit about your credit underwriting process? I guess you have a proprietary algorithms or you have a specific process that allow you to provide the decision so quickly. What is the special sauce?
|If I told you it’d have to kill you, Peter. But in all seriousness, yes, we do have a proprietary lending algorithm that takes into account not just someone’s cycle score and their debt to income ratio, which is what the banks are using primarily to drive their credit decisions. We also care about how many years do you have in training before you graduate? How much time is left until you actually get to make that physician’s salary. What is your specialty? Are you in a, in a field in which you’ll likely own your own surgery center. Where do you practice as a proxy for a Medicare reimbursement rates, and then how much free cash do you have left after you’ve paid all your bills on a monthly basis. We then put those criteria into the algorithm and we develop an internal score that’s attached to a pricing model.
|What keep you up at night, Dr. Marshall? I think there seems to be a great need for this product. But there’s also challenges in capital market. If we look at the big picture, what are the recent opportunities that you spend the most time thinking about?
|It’s a great question. It ‘s a timely question as well based upon what’s happening with an inflationary environment. The fed increasing rates at the largest clip that it has in my professional lifetime certainly has a direct impact on what our forward see right? And so a part of what my challenge is today is: How do I navigate the company mission that we’re pledging that we’re going to offer physicians and dentists capital that’s priced smartly with terms that are friendly to their use case in a macro environment that’s forcing the interest rates up. And so it means that at times we’ll be recommending to our members that they should not borrow from us at this moment that consumption spending it’s not what you borrow to do when rates are where they are and it’s giving the kind of practical advice to the people that are coming to us, because they oftentimes need that financial literacy help and lending to the folks that are using the funds for an investment itself or to bridge a temporary need and help them to create a path of repayment that’s going to be palatable. It’s going to meet them where they are in their cash flow, and it’s going to help them see daylight to getting out of our debt. That’s how we don’t charge any prepayment penalties. So the challenge really is threading the needle right of offering loans that are highly needed because of who our borrowers are, and how the markets are designed but navigating the financial markets both on the lending side but on the capital investment side for the company as we’re growing. You expect that your cost of fund should go down. But when an inflationary environment makes your cost of funds to also increase, then my need to get more capital and it’s coming at an increased cost, creates other pressures in the company as well. And so it’s it’s creating the right kind of deal structure to offset some of those pressures to ensure that we can continue to serve our customers.
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