SBA Loans for Internal Medicine Practices
SBA loans can be an important financing option for physicians who own or are looking to acquire an internal medicine practice. Understanding how medical practice financing works can help physicians determine whether an SBA loan may be appropriate for an acquisition, expansion, working capital, equipment purchase, or other business need.
SBA financing can provide qualified borrowers with access to capital for a variety of eligible business purposes. For internal medicine practices, this can make SBA loans a potential option when a physician needs financing for a significant business investment.
Here are five important things physicians should know about SBA loans for internal medicine practices.
1. SBA Loans Can Be Used for Several Business Purposes
One of the potential advantages of SBA financing is that eligible loan proceeds can be used for a variety of business purposes, depending on the SBA program, lender, and transaction.
For an internal medicine practice, financing may potentially be used for:
- Practice acquisitions
- Working capital
- Medical and office equipment
- Commercial real estate
- Office improvements and renovations
- Business expansion
- Certain refinancing needs
The specific uses permitted will depend on the loan program, lender requirements, and circumstances of the transaction.
2. SBA 7(a) Loans May Be an Option for Internal Medicine Practices
The SBA 7(a) loan program is one of the SBA’s most widely used business financing programs and may be an option for qualified internal medicine practice owners and physicians.
SBA 7(a) financing can potentially support eligible business purposes such as acquiring an existing business, purchasing equipment, financing working capital, and other qualifying expenses.
For physicians considering an internal medicine practice acquisition, an SBA 7(a) loan may provide a way to finance the acquisition while also accounting for certain additional business needs.
3. Lenders Evaluate More Than Just a Physician’s Credit Score
Physicians considering SBA financing should understand that lenders generally evaluate the overall strength of the borrower and transaction rather than relying on one factor.
Depending on the lender and loan request, factors that may be reviewed can include:
- Personal credit history
- Professional experience
- Practice revenue
- Practice profitability
- Cash flow
- Existing debt obligations
- Available liquidity
- Purchase price, if acquiring a practice
- Business plan and projected performance
For an established internal medicine practice, historical financial performance can provide important information about the practice’s ability to support the proposed financing.
4. SBA Financing Can Be Considered for Practice Acquisitions
Physicians who are purchasing an existing internal medicine practice may consider SBA financing as part of their acquisition strategy.
A practice acquisition can involve several different financial requirements. In addition to the purchase price, a physician may need capital for working capital, equipment, technology, renovations, and other expenses associated with taking over the practice.
Evaluating these needs together can help physicians determine the total amount of financing that may be required.
For example, a physician purchasing an established practice may need to maintain sufficient working capital after closing to cover payroll, rent, supplies, insurance, technology, and other operating expenses.
5. Prepare Your Financial Information Before Applying
Physicians considering SBA loans should begin organizing their financial information before submitting a loan application.
Depending on the lender and transaction, documentation may include:
- Personal financial statements
- Personal tax returns
- Business tax returns
- Practice profit and loss statements
- Balance sheets
- Bank statements
- Existing business debt information
- Information regarding the practice
- Purchase agreement or letter of intent for an acquisition
- Business projections when applicable
Having this information organized can help physicians better understand their financial position and may make the financing process more efficient.
What Makes SBA Financing Different From Conventional Financing?
SBA financing and conventional financing can have different eligibility requirements, underwriting processes, loan structures, and terms.
For some physicians, SBA financing may be attractive because of the types of eligible business uses and financing structures available. For other borrowers, conventional financing may be a better fit based on the strength of the transaction and financial profile.
There is no single financing solution that is appropriate for every internal medicine practice.
Physicians should compare potential financing options based on the specific purpose of the loan, amount needed, practice financial performance, borrower qualifications, and overall transaction.
Can SBA Loans Be Used for Internal Medicine Practice Expansion?
Qualified internal medicine practice owners may also consider SBA financing when expanding an existing practice.
Expansion may involve opening another location, purchasing additional equipment, renovating an existing office, hiring additional staff, or increasing available working capital.
Before pursuing financing, practice owners should evaluate the expected costs of the expansion and whether the practice’s projected cash flow can support the additional debt.
How Much Can an Internal Medicine Practice Borrow?
The amount an internal medicine practice may qualify to borrow depends on the specific SBA program, lender requirements, borrower qualifications, business cash flow, loan purpose, and other factors.
Rather than focusing only on the maximum amount potentially available, physicians should determine how much financing is actually needed to accomplish the intended business objective.
Borrowing an appropriate amount can help a practice maintain sufficient working capital while avoiding unnecessary debt.
Final Thought
SBA loans for internal medicine practices may provide qualified physicians with a potential source of financing for practice acquisitions, working capital, equipment, commercial real estate, expansion, and other eligible business purposes.
The appropriate financing structure will depend on the physician, the practice, the intended use of funds, and the lender’s requirements. Preparing financial information early and evaluating financing options before a major transaction can help physicians make more informed decisions.
Whether you’re acquiring an internal medicine practice, expanding an existing location, purchasing equipment, or seeking additional working capital, understanding your financing options can help you better prepare for the next stage of your practice.
