SBA Loan for a Surgery Center: Limits, Terms and Eligibility
An SBA loan for a surgery center can be one way for physicians to finance the purchase, expansion or real estate of an ambulatory surgery center. SBA-backed loans are made by participating lenders and partially guaranteed by the SBA, which can allow longer repayment terms than some conventional loans. They also come with program rules that matter a great deal for surgery centers.
This guide explains how the main SBA programs may apply to an ASC, where program limits can affect a deal and what lenders typically review. Program rules change over time, and eligibility and terms depend on the business, the borrower, the use of proceeds, program rules and lender review. Every loan is subject to approval, nothing here is a commitment to lend, and nothing here is legal, tax, billing or compliance advice.
Which SBA Programs May Apply to an ASC
Two SBA programs are most relevant to surgery centers.
- SBA 7(a): a flexible program that may be used for business acquisitions, partner buyouts, working capital, equipment, refinancing eligible debt and owner-occupied real estate
- SBA 504: a program focused on long-term fixed assets, such as purchasing or constructing owner-occupied real estate and certain major equipment
Our pages on SBA 7(a) loans and SBA 504 loans describe each program in more detail.
Understanding SBA Loan Limits for Surgery Centers
Each SBA program has a maximum loan amount set by the SBA, and those limits can change. For many dental, veterinary or primary care practices, the limits are rarely an issue. For surgery centers, they often are.
An established multispecialty center, its real estate and its equipment can together exceed what a single SBA loan may fund. When that happens, buyers may need to combine an SBA loan with other financing, use the SBA for one part of the transaction, such as real estate, or turn to conventional or middle-market financing instead. Our article on large ASC acquisition financing covers options for deals above the SBA limit.
Eligibility Questions Specific to Surgery Centers
SBA eligibility is not only about size. Surgery centers raise several questions that lenders will examine closely.
Ownership Structure
Many ASCs have multiple physician owners, and some include a hospital, management company or private equity group. SBA rules look at who owns the business, how much each owner holds and whether affiliates are counted when measuring size. Owners above certain thresholds may be required to provide personal guarantees. Healthcare counsel and the lender should review the structure early.
Size Standards and Affiliation
A center that is part of a larger group of affiliated companies may not qualify as a small business under SBA rules. This can be a deciding issue when a corporate partner or health system holds an interest.
Use of Proceeds
Not every use of funds is eligible. Purchasing units from a partner, for example, may be treated differently from buying a whole center. Lenders will want to understand exactly what the loan will pay for. A clear sources-and-uses summary that separates goodwill, equipment, real estate, working capital and any refinanced debt can help the lender evaluate the request.
Owner-Occupied Real Estate
For real estate, SBA programs generally require that the business occupy a required share of the property. A building with significant space leased to unrelated tenants may need special review.
What Lenders Typically Review
Beyond program rules, lenders evaluate the strength of the center and its owners. Depending on the transaction, they may review:
- Several years of financial statements and tax returns for the center
- Case volume by surgeon and specialty
- Payer mix and contract terms, which should not be assumed to transfer in a sale
- Licensure, accreditation and Medicare certification status
- Personal financial statements and credit for owners
- The operating agreement and any management agreements
- Existing debt and equipment leases
SBA Terms Compared With Conventional Loans
SBA loans may offer longer amortization periods than many conventional loans, which can lower monthly payments and preserve cash flow. In exchange, they may involve additional paperwork, program fees and more defined rules about collateral, guarantees and use of proceeds.
Conventional practice loans can be more flexible for some established centers, particularly where the ownership structure or deal size does not fit an SBA program. The right choice depends on the transaction, the borrowers and lender review.
Buyers can estimate potential payments with our SBA loan calculator. Estimates are for planning purposes only and do not represent an offer or approval.
When an SBA Loan May Fit a Surgery Center
An SBA loan may be worth considering when:
- A physician group is acquiring a smaller or single-specialty center within program limits
- Physicians are buying the building the center occupies
- A center needs to finance an expansion and the owners want longer repayment terms
- A center is refinancing eligible debt, subject to program rules
For a broader look at how lenders evaluate surgery centers, see our article on what lenders look for when financing an ambulatory surgery center.
Final Thoughts
An SBA loan for a surgery center can offer attractive terms, but ASCs test the edges of SBA rules more than most healthcare businesses. Ownership structure, affiliates, use of proceeds and loan limits all need to be reviewed early. Understanding those constraints before signing a letter of intent can help physicians choose a structure that actually closes.
US Medical Funding helps physicians and surgery centers evaluate SBA and conventional financing for acquisitions, real estate and expansion. Learn more about our ambulatory surgery center financing options.
