Buying a Dental Office Building: SBA 504 for Dentist-Owned Real Estate

Buying a Dental Office Building: SBA 504 for Dentist-Owned Real Estate

Dental practices are one of the best tenants for commercial real estate — and the best tenants are often the ones who should own their space. Dental office buildouts cost $100–400K, making relocation extremely costly. A dentist who owns their building controls their occupancy costs for decades and builds an asset separate from the practice.

SBA 504 is how most dentist-owned real estate gets financed.

Why Dental Offices Are Ideal SBA 504 Candidates

The SBA 504 program requires owner-occupancy of at least 51% of the building. Dental practices occupy 100% of their space in most cases — making them ideal 504 borrowers.

Additionally, dental offices have high tenant improvement costs that make the building uniquely valuable. A building with a plumbed dental suite, dedicated electrical for compressors and X-ray, and specialized HVAC for infection control is harder to repurpose than general office space — but this is exactly what a dentist wants to own, not rent.

The SBA 504 Structure for Dental Real Estate

Example: $900K dental office building purchase

SourceAmountRate/Terms

Conventional lender (50%)$450,000~8.0% variable, 10-year term
CDC — SBA 504 (40%)$360,000~6.8% fixed, 20-year term
Dentist down payment (10%)$90,000—

Monthly payments:

• Conventional tranche: ~$4,500/month


• CDC tranche: ~$2,600/month


• Total: ~$7,100/month

Compare to conventional commercial mortgage at 25% down:


• Down payment: $225,000


• Loan: $675,000 at 8.5%


• Monthly payment: ~$5,800/month (but $135,000 more cash out of pocket)

The 504 dentist keeps $135,000 in the practice for equipment or working capital. The monthly payment difference is modest because the 504 blended rate is competitive.

What Buildings Qualify

Standard qualifying buildings:


• Single-tenant dental office buildings


• Multi-tenant buildings where the dentist occupies 51%+ (rent remaining space to other healthcare tenants)


• Mixed-use buildings with dental on ground floor

Special-purpose note: If the building is custom-designed for dental (e.g., a purpose-built dental clinic that couldn't easily be repurposed), it may be classified as "special purpose" by the lender — which requires 15% down instead of 10%. Most standard office buildings converted to dental use are NOT special purpose; purpose-built structures sometimes are.

Building + Practice Acquisition: Combined Financing

When a practice is for sale and the owner also owns the building, you can often purchase both simultaneously:

• Practice/goodwill: SBA 7(a) loan


• Real estate: SBA 504 loan


• Two separate loans, coordinated closing

This is common and well-understood by dental SBA lenders. The total deal is larger (typically $1–3M combined) but both components are in their strongest financing vehicles.

Example: $700K practice goodwill + $1.1M building


• SBA 7(a): $595K for practice (85%)


• SBA 504: $1.1M for building ($55K down — 10% minus some seller contribution)


• Total out of pocket: ~$165K


• Both loans close simultaneously

Construction and Renovation Loans

If you're building a new dental office or doing a major renovation of a purchased building, SBA 504 can cover construction costs as part of the project.

Construction loans under SBA 504:


• Construction disbursed in draws as work is completed


• Converts to permanent financing at completion


• Timeline adds 3–6 months for construction vs. a purchase

For a dentist building a custom dental facility from the ground up, the 504 construction route allows you to control every design decision while accessing the best long-term rate available.

Cash-Out Refinancing: Pulling Equity for Equipment or Expansion

If you already own your dental building, SBA 504 refinancing allows you to access equity:

• Refinance existing commercial mortgage into 504 structure


• Access up to 85% LTV on current appraised value


• Use the cash-out for practice renovations, equipment, or additional location

504 cash-out refinancing requires the building to have been owned for at least 2 years and the practice to remain in occupancy.

Get pre-approved for your dental office building SBA 504 loan at 3A Lending → | (260) 201-1112