Financing a Medical Practice: Buy, Build, or Expand
You finance a medical practice three ways, and which one you are in decides everything. Buy a practice with patients already on the books and it runs on an SBA 7(a): a 10% equity injection, with a standby seller note able to cover half of that, so your own cash can be about 5%. Start one from scratch and you are funding a build-out, the equipment, and a credentialing gap of 60 to 120 days before insurers pay. Expand what you run and a line of credit bridges the wait.
Bottom line
Financing a medical practice depends on whether you are buying, building, or expanding. An acquisition uses an SBA 7(a) with a 10% equity injection, and a standby seller note can drop your own cash to about 5%. A de novo start-up funds a build-out, equipment, and 60 to 120 days of payroll before insurance credentialing clears. Finance self-collateralizing equipment on its own term, and size working capital to the credentialing gap, not to opening day.
Buy, build, or expand: the question underneath the loan
Three paths fund a medical practice, and they underwrite very differently. Buying an existing practice is judged on real collections, so it qualifies for the most generous SBA terms. Starting one from scratch is judged on projections, so lenders want a longer runway and more reserve. Expanding a practice you already run is usually the fastest, funded against revenue you can already document.
Where most owners go wrong is treating this as one financing decision. It is really two. First, what are you doing with the money. Second, what part of the need is backed by an asset a lender can take, and what part is soft cost that only your practice secures. Sort those two and the products line up almost on their own. The physician who wants to buy a retiring doctor’s panel is in a different world from the one signing a lease on empty space, even if the dollar amount is identical.
Buying is often the lower-risk path, because you inherit patients, staff, and cash flow on day one. The full mechanics of a purchase, the equity injection, the standby seller note, and the coverage test that sets the price, are in the guide to financing a business purchase. Dentists get an even sharper version of these terms, walked through in the dental practice acquisition guide, and the same playbook extends to veterinary, optometry, and physician practices.
What each product actually funds in a practice
A practice rarely runs on one product. A de novo build usually stacks three: an SBA loan for the soft costs, equipment financing for the machines, and a line of credit for the float once patients start coming. Here is what each one is for, and where it fits.
SBA 7(a): the workhorse for buying or building
For a practice acquisition, a de novo start-up, a partner buyout, or a large build-out, the SBA 7(a) is usually the cheapest capital a practice owner can get. It reaches $5 million, amortizes up to 10 years on a business purchase and 25 on real estate, and in 2026 prices around Prime plus 2.25% to 4.75%, roughly 9.75% to 12.25% APR with Prime near 7.5%. The catch is speed: figure 30 to 90 days to close.
Equipment financing: imaging, chairs, and lasers pay for themselves
An imaging suite, dental chairs, a laser, lab analyzers, or the EHR hardware all collateralize themselves, so equipment financing covers up to 100% of the cost and funds in 24 to 48 hours at roughly 7% to 20% APR. Term it to the life of the machine. The point is not just the rate. Keeping the equipment on its own lien preserves your SBA capacity for the soft costs nothing else will secure.
Working capital and term loans: the money for what you cannot collateralize
Leasehold build-out, credentialing payroll, and the ramp are soft costs. No asset backs them, so they get funded by an SBA loan or a working-capital term loan against the practice itself. This is the bucket owners underfund most, because it is the one with nothing shiny attached. It is also the one that decides whether the practice survives its first year.
Business line of credit: bridging the insurance float
An established practice waits 30 to 90 days between seeing a patient and getting paid by the insurer. A line of credit up to $250,000 covers that float and charges interest only on what you draw, which is why it beats a fixed loan for a recurring, predictable gap. Draw to make payroll, repay when the reimbursements land, and keep the room open for the next cycle.
SBA 504: for the building you occupy
If you are buying the medical office building you practice in, the 504 program funds owner-occupied real estate on a long fixed rate with 10% to 20% down by property type. A bank writes about half in a first lien, an SBA-backed debenture covers the next slice, and you bring the equity. For a mostly-real-estate purchase it usually beats folding the building into a 7(a).
The two that trip owners up are equipment and working capital. It is tempting to fold the imaging suite into the practice loan and call it done. Keep them separate. Equipment finances itself and belongs on its own term, laid out in the guide to equipment financing, while the working capital that carries you through credentialing is the money nothing else will cover. For an established practice riding the reimbursement cycle, a business line of credit or a revenue-based advance handles the float without locking you into a fixed term.
Two practices, in real dollars
Round numbers make the trade-offs visible. Here are the two cases that come up most, a practice built from nothing and a practice bought with patients on the books, on figures you can re-run with your own quote.
Opening a $600,000 family practice (de novo)
~$8,265/mo on one SBA note
The $600,000 splits into three buckets: about $250,000 of leasehold build-out, $200,000 of equipment, and $150,000 of working capital to carry payroll through credentialing. Put it all on one SBA 7(a) at roughly 11% over 10 years and the payment is about $8,265 a month, with every dollar under one lien and one guarantee. Split it instead, financing the $200,000 of equipment on its own 6-year loan near 9% (about $3,605 a month) and taking a $400,000 7(a) at 11% over 10 years (about $5,510 a month), and you pay roughly $9,115 for the first six years, then $5,510 once the equipment is retired. The split costs about $850 more a month up front. What it buys is preserved SBA capacity for your next provider and each debt termed to the life of what it bought.
Buying a $900,000 practice with patients
~$45,000 of your own cash
Total project cost is $900,000. The SBA requires a 10% equity injection, or $90,000. Negotiate a $45,000 seller note on full standby and it counts toward half of that, leaving about $45,000 of your own cash and a 7(a) funding the remaining $810,000. That loan runs roughly $11,160 a month at 11% over 10 years, which the practice’s existing collections need to cover by a comfortable margin after your own salary, the coverage test the lender applies. A conventional acquisition loan on the same practice would typically want 20% to 30% down, or $180,000 to $270,000. The seller note, not the rate, is what moves your cash to close.
The test: the down payment is a floor, not the whole number. Behind it sit the guaranty fee, closing costs, and the reserve the practice burns before insurance pays. Bring the equity and a cushion behind it. These are illustrative figures on round numbers. Run yours against a real quote.
Which product for which practice need
The same practice can touch four or five of these in its first years. The table lines up what each one funds, how much it reaches, what it costs, and how fast it moves, so you can match the product to the need instead of the other way around.
| Product | Best use in a practice | Typical amount | Cost / structure | Speed |
|---|---|---|---|---|
| SBA 7(a) | Acquisition, de novo start-up, partner buyout, big build-out | Up to $5M | ~9.75%–12.25% APR, up to 10 yr (25 on real estate) | 30–90 days |
| SBA 504 | Buying the medical office building you occupy | Up to $5M+ | Long fixed rate, 10%–20% down | 30–90 days |
| Equipment financing | Imaging, dental chairs, lasers, lab, EHR hardware | Up to $1M+ (to 100%) | ~7%–20% APR, termed to asset life | 24–48 hrs |
| Business line of credit | Bridging the 30–90 day insurance reimbursement float | Up to $250K | Revolving, interest only on the draw | Same-day–24 hrs |
| Working capital / revenue advance | Fast gap fill, the credentialing desert, a slow month | Up to $400K–$500K | Higher cost, ~12%–35%+ | ~24 hrs |
Read it this way: the SBA loan is the cheapest money and the slowest, so it fits the big, planned moves, buying, building, real estate. Everything to the right of it trades cost for speed. When the need is fast and recurring, like the reimbursement float, do not reach for the SBA loan. When it is large and one-time, do not reach for the daily-debit advance. If you are weighing the cheapest option against the fastest, the SBA loan versus term loan comparison lays out the trade in full.
The gap nobody funds: the credentialing revenue desert
Here is the part most first-time owners miss. Opening the doors is not the day the money starts. Before an insurer pays you a cent, you have to be credentialed with that payer, and credentialing a new provider commonly takes 60 to 120 days per plan. Medicare enrollment runs a similar stretch. Until your effective date lands, you can see patients and you cannot bill their insurance.
That creates a second cash gap almost nobody plans for. The first is obvious: the build-out you pay for before you open. The second is quieter and more dangerous. It is the payroll, the rent, and the loan payment you carry for weeks after you open, while the schedule fills and the claims sit in a credentialing queue. A financing plan that funds to opening day and stops walks the practice straight into it. Size the working capital to the credentialing desert, not to the ribbon cutting, and the first quiet quarter becomes a line item you funded rather than the surprise that empties the account.
One thing works in your favor, and it is worth knowing why the terms are as good as they are. Physicians and other licensed providers carry some of the lowest loan default rates of any borrower, so SBA Preferred Lenders and specialty medical lenders extend a de novo practice terms almost no other start-up sees: longer amortization, higher advance rates, and on some acquisitions up to 100% financing. The lender is underwriting your license and its earning power, not just a balance sheet that barely exists yet. Before you sign, run the file the way an underwriter will, using what SBA lenders actually check, so nothing in the package surprises you at week eight.
The mistakes that cost practice owners money
None of these is the interest rate.
The loan is not the hard part. The damage comes from four assumptions that feel reasonable right up until the file is in underwriting or the practice is a month old and the account is draining. Read them before you sign a lease or a purchase agreement.
Funding to opening day, not through credentialing
The doors opening is not the day the money starts. Most commercial payers take 60 to 120 days to credential a new provider, and Medicare enrollment runs a similar stretch, and you generally cannot bill a payer until your effective date. A build-out loan that stops at opening leaves you making payroll and rent for months against almost no collections. Size the working capital to the credentialing gap, not to the ribbon cutting.
Folding the equipment into the practice loan
It feels simpler to put the whole number on one SBA loan. It is usually the wrong move. Equipment collateralizes itself and finances on its own faster, cheaper term, so wrapping a $250,000 imaging suite into the 7(a) burns SBA capacity you will want for the next expansion and stretches a machine's cost over a term longer than the machine will last.
Draining the reserve into the down payment
On an acquisition, the 10% equity injection is a floor, not the whole cost. On top of it sit the guaranty fee, closing costs, and the cash the practice needs from the first Monday you own it. Owners who empty every account to hit the injection start ownership with the keys and no operating reserve. Bring the down payment and a cushion behind it.
Buying at a price the collections cannot service
An acquisition lender sizes the loan off the practice's ability to repay after you own it, using a debt-service coverage test, not off your personal net worth. If the asking price pushes the payment past what the collections cover by a comfortable margin, the deal does not fund at that number, no matter how much you want it. Let the coverage math set the price you can actually pay.
The through-line is simple: plan the money the way you plan the clinical build. Know what you are doing with it, know what backs each piece, and fund the wait, not just the opening. Do that and the financing becomes the part of the practice you worried about least. The SBA loan behind most of it is the lowest-cost business financing most owners will ever qualify for, which is exactly why it is worth structuring right.
See what your practice qualifies for
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Frequently asked questions
How do you finance a medical practice?
It depends on whether you are buying, building, or expanding. Buying an existing practice runs on an SBA 7(a) with a 10% equity injection, and a standby seller note can cover half of it. Starting one from scratch funds a build-out, equipment, and several months of working capital before insurance pays. An existing practice usually uses a line of credit or revenue advance to bridge reimbursement delays. Equipment is financed on its own term either way.
Can you get a loan to start a medical practice from scratch?
Yes, though a de novo start-up is underwritten on your projections and personal financials rather than existing collections, so lenders want a stronger reserve and a longer funded ramp. An SBA 7(a) is the usual tool because it can bundle the build-out, equipment, and working capital into one loan up to $5 million. Budget for 60 to 120 days of payroll after opening, while insurance credentialing clears and collections are still near zero.
How much down payment do you need to buy a medical practice?
On an SBA 7(a) acquisition, the minimum equity injection is 10% of the total project cost. A seller note on full standby, meaning the seller takes no principal or interest for at least the first two years, can count toward up to half of that, dropping your own cash to about 5%. On a $900,000 purchase, that is roughly $45,000 of your money instead of the $180,000 to $270,000 a conventional acquisition loan would want.
Should I finance medical equipment separately from the practice loan?
Usually yes. Equipment collateralizes itself, so equipment financing covers up to 100% of the cost, funds in 24 to 48 hours, and terms to the life of the machine. Keeping it on its own lien preserves your SBA and working-capital capacity for the soft costs, build-out and payroll, that no asset secures. Section 179 lets you write off qualifying equipment whether you finance it or pay cash.
How do medical practices cover the wait for insurance reimbursement?
A practice waits 30 to 90 days between the visit and the insurer's payment, and payroll does not wait. A business line of credit is the cleanest fix: draw to cover the gap, repay when reimbursements land, and pay interest only on what you use. Revenue-based financing works for a faster, one-time bridge. Both are built for a recurring float rather than a one-time purchase.
What credit score and time in business do medical practice lenders want?
For an SBA loan or a practice acquisition, plan on a personal credit score around 680 or higher, clean personal financials, and your professional license, which is a large part of what the lender is underwriting. Faster working-capital products flex lower, often qualifying practices with a few months in operation and $8,000 or more in monthly revenue. Physicians and other providers see some of the lowest default rates of any borrower, which is why the terms are generous.
Buying a practice rather than building one? The guide to financing a business purchase runs the 10% equity injection, the standby seller note, and the coverage test in full, and the SBA down payment guide breaks the equity math down by use of proceeds.
Quick Loans Direct is a lending marketplace, not a direct lender. We connect healthcare providers with SBA Preferred Lenders, specialty medical lenders, and other financing partners for 7(a) loans, 504 loans, equipment financing, and working capital. Actual rates, terms, down payment requirements, and approval decisions are made by our lending partners and the SBA based on their underwriting criteria and program rules, and vary by borrower, use of proceeds, and specialty. Rates and disclosures may vary by state. California, New York, Virginia, Utah, Georgia, Connecticut, Florida, Kansas, and several other states require specific commercial-financing disclosures that your chosen lender will provide. We never request patient records or HIPAA-protected information.
Every dollar figure and percentage on this page is illustrative arithmetic on generic numbers, shown so you can re-run it with your own deal. As of 2026, SBA 7(a) loans commonly price around Prime plus 2.25% to 4.75% (roughly 9.75% to 12.25% APR with Prime near 7.50%), reach $5 million, and fund in about 30 to 90 days. Equity injection and down payment rules are set by the SBA’s Standard Operating Procedure (SOP 50 10) and are updated periodically. Credentialing timelines vary by payer and state. Confirm current figures and program rules with your lender before you commit.
This content is for informational purposes only and does not constitute financial, tax, or legal advice. Consult a qualified professional before making a business financing decision. Last reviewed by the Quick Loans Direct editorial team on August 2026.