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Can You Get an SBA 7(a) Loan for a Medical Practice?
If you’re a doctor looking to start, purchase, or expand your medical practice, an SBA 7(a) loan could be a great choice. Find out why.
- How You Can Use a 7(a) Loan for Your Medical Practice
- Buying Out a Partner
- Building a New Medical Practice
- Refinancing a Medical Practice
- Buying or Expanding a Medical Practice
- Financing Equipment Purchases
- Working Capital
- What Collateral May Be Required for Your Loan?
- Case Study: Opening a Physical Therapy Practice in Kansas
- Other SBA Financing Options
- Related Questions
- Get Financing
Right now, there are more than 230,000 medical practices in the United States, and if you’re a doctor looking to start, purchase, or expand your medical practice, an SBA 7(a) loan could be the perfect choice. SBA 7(a) loans are available for all kinds of medical practices, including physical therapy practices and pharmacies, and may also be available for chiropractic practices, especially those that offer medical care.
SBA 7(a) loans are offered by a variety of different lenders, including banks, credit unions, and online lenders. They offer terms up to 25 years for commercial real estate, and loan terms as large as $5 million.
These loans can also be used for purchasing medical equipment as well as funding working capital for expenses such as marketing and employee salaries.
How You Can Use a 7(a) Loan for Your Medical Practice
Buying Out a Partner
When one or more doctors decide to retire from a practice or move to another location, it’s common for the other partner or partners to purchase their stake in the practice— but they might not always have the cash to do so, and an SBA 7(a) loan may be able to help.
Building a New Medical Practice
Almost all new construction costs can be funded by an SBA 7(a) loan, including furniture, lighting, security systems, and even landscaping.
Refinancing a Medical Practice
SBA 7(a) loan funds can be used for refinancing the debt on a current medical practices, with some restrictions.
Buying or Expanding a Medical Practice
SBA 7(a) loans can be used to purchase existing medical practices, or to expand a medical practice that you currently on.
Financing Equipment Purchases
Doctors and certain other medical professionals can use SBA 7(a) loans to purchase medical equipment.
Working Capital
Your medical practice may need to access financing for short-term business needs, and the SBA 7(a) loan handles this well.
Using the SBA's CAPLines program — essentially a line of credit — is also possible. The key difference between a business line of credit and a loan lies in the structure and usage. With a loan, businesses receive a fixed amount of money upfront and typically have a predetermined repayment schedule. In contrast, a business line of credit offers a flexible borrowing option, allowing businesses to make withdrawals and repayments based on their specific financial needs.
What Collateral May Be Required for Your Loan?
Collateral is required when obtaining an SBA 7(a) loan of more than $50,000. In order to secure the loan, potential collateral could include personal assets or business equipment that you own. These could be offered as a form of security to the lender to mitigate the risk involved in providing the loan beyond what the SBA guarantees.
It is important to thoroughly consider your available collateral and understand the specific requirements and terms set by the lender before proceeding with a physician loan.
Case Study: Opening a Physical Therapy Practice in Kansas
Samantha, a skilled physical therapist, decided to open her own medical practice in Olathe, Kansas. With years of experience under her belt, she was eager to provide personalized care to patients in need of physical therapy services. Samantha found the perfect location and began creating a plan to transform the space into a state-of-the-art facility.
However, as a new business owner, Samantha faced the challenge of securing funds to cover the costs of equipment, renovation, and working capital for her medical practice. She started exploring her options and soon discovered the SBA 7(a) loan program. This program offered the financing she needed with favorable terms, making it an attractive choice for her physical therapy practice.
Samantha approached a local SBA-approved lender and submitted her business plan, financial projections, and documentation showcasing her experience and qualifications as a physical therapist. The lender reviewed her application and approved her for an SBA 7(a) loan, recognizing the potential of her practice to thrive in Kansas City's southwestern suburbs.
With the loan funds, Samantha transformed her chosen location into Olathe Physical Therapy, a modern facility equipped with the latest technology and resources for her patients. She was able to purchase the necessary equipment, such as treatment tables, exercise machines, and therapeutic devices, and renovate the space to create a comfortable, welcoming environment for her patients.
Thanks to the SBA 7(a) loan, Samantha successfully opened Olathe Physical Therapy and began offering quality physical therapy services to patients in the community. Her practice quickly gained a reputation for excellent care, personalized treatment plans, and a supportive atmosphere, ensuring its continued success and growth.
This is a fictional case study provided for illustrative purposes.
Other SBA Financing Options
In addition to SBA 7(a) loans, larger medical practices may be interested in looking into SBA 504 loans. SBA 504 loans have a larger maximum loan amount than SBA 7(a) loans and are specifically designed to finance commercial real estate transactions.
Related Questions
What are the requirements for an SBA 7(a) loan for a medical practice?
The requirements for an SBA 7(a) loan for a medical practice include:
- Loan Size: $30,000 - $5 million (some exceptions for smaller loans may be granted)
- Loan Purpose: Loan can be used for financing commercial real estate, equipment, and working capital
- Loan Term:
- Real Estate: Up to 25 years
- Equipment: Up to 10 years
- Working Capital: Up to 10 years
- Credit Score Requirement: 660 minimum
- Collateral: Additional collateral is often required
- Documentation: Documentation for SBA 7a loans for medical practices is extensive, and includes:
- Year-to-date balance sheet
- Business tax returns (for the last 2 years)
- Business licenses
- Personal tax returns and resumes for 20%+ owners
- Projected financial statements (1-3 years)
What are the advantages of an SBA 7(a) loan for a medical practice?
The advantages of an SBA 7(a) loan for a medical practice include:
- Loan size of $30,000 - $5 million (some exceptions for smaller loans may be granted)
- Loan can be used for financing commercial real estate, equipment, and working capital
- Loan term of up to 25 years for real estate, up to 10 years for equipment, and up to 10 years for working capital
- Minimum credit score requirement of 660
- Additional collateral is often required
For more information, please visit https://www.commercialrealestate.loans/medical-office-loans and https://www.commercialrealestate.loans/healthcare-loans.
What are the disadvantages of an SBA 7(a) loan for a medical practice?
The disadvantages of an SBA 7(a) loan for a medical practice include:
- Lengthy approval times (for standard SBA 7(a) loans)
- Lots of documentation
- Collateral is often required
- Certain businesses, including real estate investing, lending, gambling, and speculation are prohibited
- High credit scores are typically required (typically 680+)
- May be restrictions on supplemental/additional financing
How long does it take to get an SBA 7(a) loan for a medical practice?
It typically takes 30-45 days to get an SBA 7(a) loan for a medical practice. However, the exact timeline can vary depending on the complexity of the loan and the amount of paperwork required.
For more information, please see the following sources:
What documents are required to apply for an SBA 7(a) loan for a medical practice?
To apply for an SBA 7(a) loan for a medical practice, you will need to provide the following documents:
- SBA Form 1919 (borrower information form)
- SBA Form 912 (statement of personal history)
- SBA Form 413 (personal financial statement)
- Financial statements, including a balance sheet, profit and loss, and income projection.
- Agreement to purchase the business
- Letter of intent to buy the business
- Business tax returns for the past three years
- Any outstanding business debt
- Long-term business contracts
- Documentation of business assets
- Business lease agreement
- Incorporation documents and/or business license
- Business plan.
In addition, the SBA will usually order an independent business appraisal to give lenders an idea of what the true value of the business is.
To complete your application package, you’ll be required to submit SBA-specific forms and documents. The forms and documents commonly required in the application package include:
- SBA Form 1919 (borrower information form)
- SBA Form 912 (statement of personal history)
- SBA Form 413 (personal financial statement)
- Financial statements, including a balance sheet, profit and loss, and income projection.
The SBA allows applicants to get help (for example, from a lawyer or a translator) filling out the application paperwork, but your lender will be required to submit information about who gave you help to the SBA, so you’ll need to document who this person is as well.