Ground-Up Urgent Care Construction Financing
Urgent care construction financing helps an operator buy land and build a new freestanding center from the ground up, rather than leasing space or converting an existing building. A purpose-built facility can offer the visibility, parking and layout an urgent care center needs, but it also brings more moving parts than a typical practice loan.
Construction projects involve land, permits, contractors, draws, inspections and eventually a permanent loan, all before the first patient walks through the door. This guide explains how ground-up urgent care projects are usually financed and what lenders typically want to see. Zoning, permitting and licensing rules vary by state and municipality, and nothing here is legal, tax, construction or accounting advice.
Why Some Operators Build Instead of Lease
Many urgent care centers open in leased retail space. A ground-up build becomes attractive when the right space is not available in the target trade area, or when the operator wants a design that suits urgent care workflow from the start.
Reasons operators consider building include:
- A highly visible pad site on a busy corridor with no suitable existing building
- The need for a specific layout, such as imaging space, separate entrances or more exam rooms
- A long-term plan to own the real estate instead of paying rent
- A desire for drive-up access and dedicated parking
Building also adds risk. Construction can run over budget or behind schedule, and the operator carries the cost of the project before the center generates any revenue.
How Urgent Care Construction Financing Is Structured
Ground-up projects are often financed with a construction-to-permanent approach. During construction, the lender advances funds in stages, called draws, as work is completed and inspected. Borrowers often pay interest only on the amount drawn during this phase. Once the building is finished and a certificate of occupancy is issued, the loan converts to, or is refinanced into, a permanent loan with a regular repayment schedule.
Depending on the lender and project, this may happen within one loan or through separate construction and permanent loans. Options may include:
- Conventional real estate loans: following the lender’s own underwriting, often for established operators with strong cash flow
- SBA 7(a) loans: which may be used for construction of owner-occupied property and can sometimes include equipment and working capital, subject to program rules
- SBA 504 loans: designed for owner-occupied real estate and fixed assets, explained in our guide to SBA 504 urgent care real estate loans
In every case, eligibility and terms depend on the business, the borrower, use of proceeds, program rules and lender review.
What the Project Budget Should Include
Lenders expect a complete, realistic budget. A construction budget for a freestanding urgent care center often includes:
- Land acquisition and closing costs
- Site work, utilities, paving and landscaping
- Architectural, engineering and permitting costs
- Hard construction costs for the shell and interior
- Medical-specific improvements, such as plumbing for exam rooms and shielding for imaging
- A contingency reserve for overruns
- Interest carried during construction
- Furniture, equipment and technology
- Pre-opening staffing, marketing and working capital
Leaving any of these out can create a funding gap late in the project, when it is hardest to fix. Our breakdown of urgent care build-out costs covers interior work in more detail, and our overview of the cost to open an urgent care center puts construction in the context of the full start-up budget.
What Lenders Review on a Construction Loan
Construction lending carries more uncertainty than buying a finished building, so lenders typically review the project, the team and the operator closely.
Items lenders may request include:
- Plans, specifications and a detailed construction budget
- The general contractor’s contract, experience and financial strength
- Permits, zoning approvals and the construction schedule
- An appraisal based on the completed project
- Environmental and site reports
- A business plan with projections and a market analysis for the new center
- The operator’s urgent care experience, credit and liquidity
- Evidence of the borrower’s equity contribution
Lenders may also require inspections before each draw, lien waivers from contractors and proof that the project remains in balance, meaning remaining funds are sufficient to finish the work.
Managing Construction Risk
Delays and cost overruns are among the biggest risks in ground-up construction. Operators can reduce them by:
- Working with architects and contractors experienced in medical facilities
- Building a meaningful contingency into the budget
- Confirming zoning, parking and signage approvals early
- Coordinating equipment specifications, such as imaging, before walls are closed
- Starting state licensure, payer enrollment and credentialing planning well before opening, with guidance from healthcare counsel and credentialing professionals
The last point is easy to overlook. A finished building does not generate revenue until the center is licensed where required, staffed and able to bill payers, so the operating plan should account for that gap.
Planning for the Ramp-Up
New urgent care centers usually take time to build patient volume. Once construction ends, the operator will be paying for staff, supplies and debt service while volume grows and claims are processed. Including a working capital reserve in the overall financing plan can give the center room to reach steady operations. Our urgent care start-up financing page explains how lenders may approach new centers.
Final Thoughts
Urgent care construction financing can help an operator create a facility built around its workflow, in the location it wants, with long-term ownership of the real estate. It also requires careful budgeting, an experienced project team and enough capital to carry the center through construction and ramp-up. Every loan is subject to approval, and nothing here is a commitment to lend.
US Medical Funding helps urgent care owners finance new construction, real estate and start-up costs. Learn more about our urgent care practice financing options.
