SBA Medical Practice Loans
SBA 7a loans are excellent loans for physicians in need of medical practice financing for any of the following:
- medical practice purchase
- building purchase, refinance or construction
- medical practice refinance
- medical practice expansion
- partner buyout
- equipment financing if rolling equipment into larger loan
SBA lenders offer medical practice financing for most practice types as well as physical therapy practices and pharmacies and they have a special affinity for dentists, veterinarians, ophthalmologists and optometrists. Some will also finance successful chiropractic practices (especially those that offer medical care) and some will finance concierge practices as well as functional medicine.
SBA Medical Practice Financing Benefits
SBA medical practice loans can be an excellent choice for many physicians in that they are typically more flexible than a “bank loan.” Keep in mind that SBA loans are also “bank loans,” it is just that they effectively have an insurance policy from the SBA that gives them more latitude to offer financing they otherwise might not offer and they can be a good fit for doctors with excellent credit or those with imperfect scenarios such as:
- Less than perfect credit
- Lack of experience
- Poor cash flow
- Projections-based transactions
- Loans with real estate
25 Year Loans For Real Estate
If you are purchasing a practice and a building and the building is the larger percentage of the transaction then you can get a fully amortized loans up to 25 years and in many cases, the loan can be fixed for the entire 25 year term.
100% financing is available for existing practices that are expanding, moving or renovating.
Loans are available for practice, equipment and building financing. Some lenders will work off of your projected income for the new location, while others will only make the loan if your existing practice and your historical cash flow is enough to service the proposed debt. New or existing buildings can also be financed and ground up construction is definitely possible.
Additionally, it is also possible to get financing for a new practice IF you can show that you have been operating as a separate entity within another practice. For instance, we recently worked with a doctor who was part of a 3 doctor practice and each had separate patients and each could provide a separate P & L and production reports, so even though the doctor was not on her own we were able to show that she was independent and therefore eligible for 100% financing.
Down Payment Options
The SBA is flexible with regard to the source of a required down payment should you need one, for instance, in the case of a “startup.” Typically you would only need 10% down and the possible sources include:
- Cash that is borrowed as long as you have another source of income (or income from spouse) to repay the borrowed funds
- 410k from a former employer or Self-Directed IRA (these can be used tax and penalty free in some cases)
- “Investors” – typically friends or family whom you give a small percentage of ownership of the practice in exchange for the down payment funds
- Seller held funds – seller held debt can only represent half (usually 5%) of the required down payment and must be on “full standby” (no payments) for as long as you have the SBA loan. Many sellers are okay with this arrangement as long as they are getting what they consider to be a fair price for the practice.
Keep in mind that SBA practice loans do not have a prepayment penalty, so you are free to refinance it at any time and SBA medical pactice financing for an existing, profitable practice without real estate are available for up to 10 years with as little as 10% down up to a max loan amount of $5 million.
NON-SBA Medical Practice Loans
In some cases it is actually easier for doctors, dentists and veterinarians to get non-SBA medical practice financing and 100% financing is available. 100% financing is available for startups as well as for existing practices. Startup financing is available with attractive terms and sometimes available with lower payments on the front end of the loan.
Existing profitable practices (acquistion or refinance) can get truly excellent terms.
Summary of SBA 7a Loan for Physicians:
- Banks and lenders favor doctors since they are typically better credit risks than many other businesses and are typically unaffected by downturns in the economy
- Existing practices purchasing real estate can get a loan with zero down and possibly fixed for 25 years
- SBA allows flexible sources for down payment
- Construction money is available for existing practices with zero down and for startups with a down payment of at least 10%
- Because of the SBA guarantee and a healthy secondary market, SBA medical practice loans are one of the few types of commercial loans most banks and lenders will do in almost any economy
Please click here for more detailed information about SBA financing for doctors.