Practice Loans and Commercial Real Estate Loans for Physicians, Dentists & Veterinarians
100% Financing For Medical Practices – Including Buildings and Equipment
Medical practices are eligible for 100% financing with the SBA’s 7a loan program as well as through other medical practice programs. Financing is available for:
- the purchase an existing medical practice
- the construction of a new building
- partner buyouts
- debt refinances
- equipment purchases
- property improvements
- working capital
- practice equity loans
100% Fixed Rate Medical Building Financing – Construction or Acquisition
There are typically 2 ways to get 100% for a medical facility. The most attractive program for the financing of a building is an “85/15” or a “90/10” that allows you to either purchase or build a facility.
The financing typically consists of 2 (fully) fixed rate loans – an 85% or 90% loan to value real estate loan and a 10% or 15% loan against your practice. This program is available for existing practices that have equity.
The real estate loan is typically a low 5, 7 or 10 year fixed rate with a 20 or 25 year amortization and the 10% to 15% practice loan is typically a low 10 year fixed rate.
100% in 1 Loan
100% financing is also available in just one loan. The loan is typically floating or fixed for up to 5 years with a 25 year amortization. It is available for purchase, construction or refinance of a building.
Using this program we recently helped an established medical practice secure 100% financing for $4 million on a building purchase and a dentist secure 100% construction financing for a new building.
Practice Financing – Very Low Rates for 10 Year Term
100% NON-SBA Medical Practice Financing is available for doctors in most states at aggressive rates with low fees.
Practice acquisition financing or practice refinancing is currently available with low rates for both short term adjustable rates and 10 year fixed rates.
Longer term amortizations – up to 15 or 20 years – are also for available for practice financing, but at slightly higher rates. (See below for more info).
Please contact us re: qualifying: 1-800-414-5285
15 Year Fixed Rate 100% Practice Financing With or Without A Building
100% financing is available on a 15 year fixed rate for the acquisition or refinance of existing medical practices including:
- Independent Pharmacies
This program is a fully amortized 15 year fixed rate and term. It is available for qualified borrowers acquiring or refinancing existing medical practices or buildings. The rate for this program is higher than a 10 year because is fully fixed for 15 years.
15 or 20 Year Amortization with 3, 5, 7 or 10 year Fixed Term
Practice financing is also available with a 15 year amortization, but with a shorter initial fixed period.
The rates for this program are a little higher than those with a 10 year term, but the longer amortization has a dramatic effect on the payments.
Here is a comparison of a 5 year fixed with a 15 year amortization vs. a 10 year fixed for a loan amount of $1.5 million:
10 year fixed at 4.5%: $15,546
5 yr fixed/15 year am at 5.65%: $12,376
Payment Savings = $3170
Another available program is a 10 year fixed with a 15 year amortization. This loan has value as it has both a 15 year amortization AND it is fixed for first 10 years. The rates are .75% to 1% higher than the most aggressive 10 year fixed and it has some additional fees, however the fees can be financed.
20 Year Amortization
20 year medical practice loans are available for strong practices borrowing $2 million or more. This loan is not as popular as most borrowers would rather pay off their loans quicker, but it is available.
SBA Medical Practice Refinance or Acquisition Without Real Estate or With A Lot of Goodwill
SBA also allows for 10 year loans for a practice acquisition that does not include real estate.
SBA is a good option if there is something about the transaction that is preventing you from qualifying for a conventional practice loan – for instance, if you have had credit issues in the recent past. Also, most SBA lenders are flexible regarding how they are willing to structure the financing including allowing seller held financing if they cannot get comfortable enough with the request.
100% SBA Medical Practice Construction Financing (Ground Up or Renovation)
25 year fully amortizing SBA loans are available for 100% of the construction costs for an existing medical practice looking to construct, acquire or renovate a building.
You must be able to show historical cash flow of at least 1:1 to handle new/proposed debt. This program is ideal for “rent replacement” situations where your new building mortgage payment will be approximately equal to your current lease payment.
The program is typically a very reasonable variable rate pegged to the Prime rate or it can be a 5 year fixed and it can be used for an expansion of an existing practice using existing cash flow or realistic projections.
Refinance of Practice Debt
100% of the debt of an existing medical practice may also financeable with either SBA or conventional loans.
Many practices have start up debt and equipment loans at rates higher than current market or they may have loans with graduated payment terms that will end up being a burden on the practice in the future. Low 10 and 15 year fixed rate terms are available to refinance this debt.
Medical Practice “Equity” Loans
If you have significant equity in your medical, dental or veterinary practice you may be able to tap that equity for “wealth creation” or debt consolidation purposes (personal or business). This program allows you to leverage the value of your practice for financial planning and investment purposes.
The proceeds of the loan must typically be used for practice expansion, invested in a wealth building asset or used to help you consolidate or restructure debt with a tangible benefit for you or the practice.
Examples for use the “cash out” could be funding the down payment on a multi-family apartment, paying off credit card debt or even the initial deposit for a Defined Benefit Plan or IRA.
Here is a simplified example of how much equity you could borrow:
Let’s say you have a practice that has consistent gross revenues of $1 million and practice debt of $100,000. A practice equity loan will typically allow a maximum loan amount of between 50% and 70% of your gross revenue, so in this case you could borrow between $400,000 and $600,000 in practice equity.
Please contact us at 1-800-414-5285 if you would like more information about this program.
Construction Financing and Building Purchase for Start Ups
A 10% down payment is typically required for a construction loan to a start up, but there are situations where we can arrange for new doctors to borrow the 10% needed for the down payment as well as provide the rest of the financing including working capital and equipment.
Please call us at 1-800-414-5285 for more information.
Build-Out of Lease-Hold Space
Under a portfolio program, it is possible for established and some start up practices to borrow 100% of the money necessary to build out leased space for their practice needs. Financing is available for up to 15 years vs. 25 years for loans that include the real estate.
An established practice will pay less in fees than a startup in this case, but both would get very good terms.
Under the SBA program, start up practices can also borrow the money for build out of leased space if they can put down 10% down, but that the 10% can be borrowed IF you have “outside” income from another source/business or from a spouse that can service the additional debt. Gift funds are also acceptable.
SBA “Blended Maturity”
For a practice and building purchase with significant intangible assets (blue sky/goodwill), SBA underwriting guidelines dictate that a 25 year term is possible as long as commercial real estate makes up the largest percentage of the use of funds. The guideline does NOT say that a medical facility or building has to account for more than 50% of the financing – it states that the real estate portion of the loan must be the largest percentage, so it could be that the building is worth less than half of the total sales price but still more than the goodwill and equipment and therefore would be eligible for a 25 year term and amortization. Not all SBA lenders will underwrite the loan this way, but there are some that will for the right borrowers.
FYI: If a medical building is not the largest percentage then the SBA requirement calls for a “weighted average calculation” to determine the longest allowable maturity and you end up with a term between 10 and 25 years.
SBA 504 for Real Estate & Equipment
The SBA 504 loan is another excellent choice for Physicians who need to build a new office, renovate or expand an existing medical or surgical facility or refinance their current facility as part of an expansion. The limitation the 504 has compared to the 7a is that it is more difficult to structure 100% financing as that would require using equity from another property in lieu of down payment.
Benefits for Doctors and Medical Facilities
- 504 loans have a second mortgage that is fixed for 20 years at a below market rate.
- You can include the financing of expensive medical equipment with a useful life of 10 or more years.
- Like the 7a, It is typically long term fully amortized financing with no balloons, calls, re-qualifying or refinancing necessary later.
- 90% loan to cost financing – i.e. you can finance improvements, closing and soft costs.
- Rates are low and fees are reasonable.
SBA Physician Loans are well suited for many types of medical practices and facilities including:
- Obstetrics & Gynecology
- Plastic Surgery
- Radiology and MRI Imaging Centers
- Sports Medicine
*100% practice financing is available for startups, 100% real estate loans are also possible for startups, but more difficult to qualify for than for than an existing practice. SBA loans are typically more flexible with regard to lower credit scores, “uneven” profitability, amount of collateral, etc.
**100% financing for chiropractic practices is possible, but less lenders are willing to offer it.
Please contact us at 1-800-414-5285 for more info about SBA medical practice and medical building financing.
If you are interested in building an energy efficient building or using renewable energy in your facility, please our page re: SBA’s Energy Efficient loan program: SBA 504 Renewable Energy Benefits