Financing for practice owners.

Why practices get their own lending category

Lenders treat a dental, medical or veterinary practice differently from a typical small business, and generally more favourably. Three things drive that: collections are recurring and reasonably predictable, the licence required to operate limits how much new competition can appear, and historical failure rates for established practices are low relative to general small business.

The practical result is that a lender will often finance a practice acquisition at a higher loan-to-value than they would a restaurant or a retail shop, and will weigh the practice’s own cash flow more heavily than the buyer’s personal balance sheet.

The four transactions we see most

Many deals are two of these at once — buying a practice and its real estate together is common, and can often be structured as a single financing conversation rather than two.

What a lender actually evaluates

• Collections and production history. Three years, reconciled to tax returns. Trend matters as much as the absolute number.
• Cash flow after your compensation. The test is whether the practice services the debt and still pays you a living. Add-backs are allowed but each needs support.
• Patient or client base. Active patient count, recall rates, and how concentrated revenue is in one provider or one referral source.
• Payer mix. For medical and dental, the split between insurance, fee-for-service and government payers changes the risk profile.
• The transition plan. How long the seller stays, how patients are introduced, and what stops the base walking out the door.
• Your credentials and experience. Licensure, years practising, and whether you have run a business before.

Buying a practice: where files actually fail

Almost never on the buyer. Practice acquisitions fail on the target’s records. If the seller’s books are informal, if a meaningful share of revenue is undocumented, or if the financials cannot be reconciled to the tax returns, the file becomes very hard regardless of how good the practice looks in person.

A valuation is generally required, and it needs to agree with the purchase agreement. Where the price is well above what the cash flow supports, the gap has to be closed somehow — a larger injection, a seller note on standby, or a renegotiated price.

Buying your practice real estate

If your practice occupies the building, you are generally looking at SBA 504 or a conventional owner-occupied loan rather than an investment-property loan. The occupancy requirement is the dividing line: the business has to occupy enough of the space to qualify. That distinction catches people out when they plan to lease part of the building to another practice.

Buying the building you already rent is one of the more straightforward moves in practice ownership — you know the space works, and the rent you have been paying becomes evidence the practice can carry the payment.

Specialties we finance

• Dental and specialty dentalGeneral, ortho, oral surgery, endo, perio and pediatric.
• VeterinarySmall animal, mixed and specialty, including practice plus real estate.
• Medical and physician practicesPrimary care and specialty groups, including partner buy-ins.
• Optometry, chiropractic and therapyOptical, chiro, physical and occupational therapy practices.

Common questions