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
Turnarounds
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
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 (these can be used tax and penalty free in some cases)
Gifts
“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.
Medical Practice Loans are typically available from three types of lenders:
SBA Lenders
Healthcare Financing department of Traditional Banks
Specialty Medical Practice Lenders
This post is about non-SBA options. If you need info about Medical Practice Business Loans from the SBA then click here.
Medical Practice Loan Options
1. “Bank” Medical Practice Financing
There are many banks and lenders that offer medical practice loans. Most offer 100% financing at below market rates for up to 10 years on practice debt and some will offer longer terms and amortizations up to 15 years.
If the transaction includes real estate then they will consider 20 to 25 year loans.
Most lenders will finance Dental and Veterinary practices in the “medical practice” category, and some will consider physical therapy clinics as well as (strong) chiropractic practices, although more often than not PT and doctors of Chiropractic will fall under the domain of SBA lenders.
Funds are available for refinancing existing practice debt, purchase/acquisition of an existing practice as well as start up for qualified doctors with at least 2 years clinical experience and strong personal credit and collateral.
2. Specialty Lenders:
Specialty lenders also lend to Dentists, Optometrists, Opthalmologists, Veterinarians and Pharmacists
Qualifying Criteria:
Minimum Credit Score: none, but 675 or better preferred
Global Debt Service Coverage Ratio: ideally 1.20 or better
Fees: vary
Prepayment Penalty: varies
Uses:
Practice Purchase/Medical Practice Acquisition Loans
Partnership buy-in or partner buy-out
Practice Start-up Loans for dentists and veterinarians and practice expansion loans (2nd location) for Medical and Optometry. (Available with deferred or graduated payment options).
Equipment and Tenant Improvement
Both FIXED and Variable Rate Loans available with amortization of 3 to 15 years. Variable rates can adjust at 3 or 5 years.
3. Application Only Loans
Application only loans are available to medical doctors, dentists, veterinarians and optometrists for equipment and tenant improvements up to $200K assuming a 700+ credit score.
Loans are for existing practices that are at least 2 years old.
Terms are 3 to 7 years.
The tenant improvement portion may be limited to 30% of the loan amount.
Working capital loans are available up to $50,000.
Competitive rates
4. Quick Close “Signature” Loan
Quick close working capital loans with no (hard) collateral required are also available.
They can be relatively expensive but can provide a decent fix to a short term cash need and the whole process is handled electronically.
Doctors who have used the program have found it helpful in the following situations:
meeting payroll
hiring additional staff
consolidating debt
equipment purchase
marketing
tenant improvements
Approximate Terms
Rates start at 8.99 % for 720 plus credit scores (higher “double digit” rates for lower credit scores)
Maximum Loan: $200,000 ($20,000 minimum)
Moderate pre-payment penalties
Doc prep fee $2000 (this fee is financed so there is no out of pocket)
7 year term
Approval within 3 business days of receipt of loan documentation
Loan can fund in as little as 5 days
Underwriting Criteria:
Minimum credit (FICO) score of 660
Minimum income of $150,000
Valid medical license (good standing)
Maximum Debt to Income ratio of 65% or less Debt 45% of income
For more information about any of the above medical pracitce loans contact:
jking(at)greencommercialcapital(dot)com or call 1-800-414-5285