A Powerful Financing Option for Doctors Buying a Practice

There is a financing option available to doctors that many simply do not know exists.

When physicians begin exploring practice ownership, the conversation almost immediately centers around SBA loans. The SBA 7(a) program is widely known and commonly used for small business acquisitions.

But for certain medical practice purchases, there is a more strategic option.

If you are a licensed physician buying a practice from another doctor, you may qualify for specialized medical financing structured specifically around:

• Your credentials as a doctor
• The fact that you are purchasing from a licensed physician
• The historical revenue of the practice

This type of program can offer higher loan amounts, competitive rates, long repayment terms, built in working capital, and even real estate financing.

It is not widely advertised. Only a limited number of banks offer this type of physician focused lending, and access typically depends on knowing how to structure and position the transaction properly.

Most doctors are simply never introduced to it.

How This Financing Is Structured

These physician focused programs evaluate the average of the past two years of gross revenue of the practice being acquired.

Depending on specialty, financing may be available up to:

• 75% of revenue for general medical practices
• 75% of revenue for podiatry practices
• 95% of revenue for dentists and veterinarians
• 65% of revenue for ophthalmologists

Yes, revenue.

While revenue plays a significant role in loan sizing, the practice must still demonstrate sufficient cash flow. These programs typically require a minimum debt service coverage ratio of approximately 1.15.

In many strong practices, the actual coverage is far higher.

A Real World Example

Let’s walk through a structured example.

Assume a medical practice has:

• 2-year average revenue: $2,580,000
• Seller’s Discretionary Earnings: $475,000
• Agreed multiple: 3.8x SDE

Purchase price:

$475,000 × 3.8 = $1,805,000

Add:

• Working capital: $100,000
• Estimated closing costs: $27,000

Total capital required: $1,933,000

Loan Terms

Assume:

• Loan amount: $1,933,000
• Interest rate: 6.10%
• Term: 15 years

This produces:

• Monthly payment: $16,416
• Annual debt service: $196,996
• Debt service coverage ratio: 1.95

A 1.95 DSCR is well above the 1.15 minimum requirement.

After servicing the debt, the acquiring doctor still retains substantial cash flow.

Now here is what makes this structure particularly powerful.

The $100,000 in working capital is funded as part of the loan and deposited directly into the acquiring doctor’s business account at closing.

Day one.

That means the new owner steps into the practice with liquidity already in place to:

• Cover payroll confidently
• Manage credentialing delays
• Upgrade equipment
• Invest in marketing
• Stabilize operations
• Operate without unnecessary financial pressure

Too many acquisitions struggle because the buyer enters ownership undercapitalized.

This structure does the opposite. It sets the acquisition up for success from day one.

Specialty Based Loan Capacity

Using the same $2,580,000 revenue base, potential acquisition financing could look like this:

• General Doctor at 75% → max example loan amount up to $1,935,000
• Dentist at 95% → max example loan amount up to $2,451,000
• Podiatrist at 75% → max example loan amount up to $1,935,000
• Ophthalmologist at 65% → max example loan amount up to $1,677,000
• Veterinarian at 95% → max example loan amount up to $2,451,000

In some specialties, financing capacity can exceed the negotiated purchase price.

That creates flexibility to:

• Fully finance the acquisition
• Preserve personal liquidity
• Include working capital
• Structure expansion
• Fund improvements

All while maintaining healthy coverage above the 1.15 requirement.

Real Estate Financing for Physicians

In addition to acquisition financing, some of these banks also offer commercial real estate loans tailored specifically to doctors.

This allows physicians to:

• Purchase the building where their practice operates
• Acquire real estate at the same time as the practice
• Expand into additional locations
• Relocate strategically

Owning both the practice and the real estate can significantly strengthen long term wealth building.

Why This Matters

This financing is not available at every bank. It is offered by a small number of institutions that understand physician acquisitions.

Access depends on:

• Clean financial reporting
• Proper deal structure
• Transferable lease terms
• Strong positioning of the transaction
• Relationships with the right lending partners

This is where experience and guidance make a measurable difference.

If You Are Considering Buying a Practice

If you are exploring practice ownership and want to understand:

• Whether you qualify for this type of financing
• How much you may be eligible to borrow
• What your monthly payments would look like
• How to structure working capital into your loan
• Whether this option is stronger than an SBA structure

I offer a complimentary consultation to review your specific scenario and, when appropriate, introduce you to the limited banks that offer this program.

Understanding your financing options early can dramatically improve how you negotiate and structure your acquisition.

To learn more about the author, Allura Engel, Medical and Healthcare Transition Specialist at EDGE Business Advisors, and to view her full bio and services, click here.

If you would like to schedule a free consultation to discuss your acquisition goals and explore whether this financing option is available to you, reach out to start the conversation.

To learn more about the author, Allura Engel, Medical and Healthcare Transition Specialist at EDGE Business Advisors, and to view her full bio and services, click here.