How to Finance a Medical Practice Acquisition with SBA Loans

Buying a medical practice is one of the most significant financial decisions a physician makes — and SBA 7(a) is how most of those transactions get financed. The healthcare M&A market is active: hospital systems selling off outpatient practices, retiring physicians looking for exit, and corporate consolidators creating opportunities for independent buyers who can move quickly.

Here's how SBA practice acquisition financing works end-to-end.

How Medical Practices Are Valued

Before you can structure financing, you need to understand what you're buying. Medical practices are typically valued at a multiple of EBITDA (earnings before interest, taxes, depreciation, and amortization) — adjusted for owner compensation.

Typical valuation multiples (2026):
Practice TypeEBITDA Multiple

Primary care0.5–1.5x
Specialty (ophthalmology, derm, ortho)2–4x
Urgent care2–4x
Ambulatory surgery center4–7x
Behavioral health2–4x

Primary care trades at lower multiples because of physician dependency — the practice value is more tied to the departing physician. Specialty practices with recurring procedure revenue command higher multiples.

What a lender uses: Adjusted EBITDA = practice net income + physician compensation above market rate + depreciation/amortization + one-time expenses. This "owner's benefit" figure is the cash flow available to service debt and pay the acquiring physician's market-rate salary.

Typical SBA Deal Structure for Practice Acquisitions

For a $1M practice acquisition:

SourceAmountNotes

SBA 7(a) loan$850,00085% — maximum SBA guarantee
Buyer equity$100,00010% minimum injection
Seller carry note$50,0005% — subordinated, deferred

The seller note (also called seller carry or seller financing) is a common feature. SBA allows sellers to carry a portion of the purchase price as a subordinated note, with principal payments deferred for at least 24 months. This helps buyers who are short on cash inject the required equity without a full out-of-pocket down payment.

For larger acquisitions ($3M+): Multiple SBA lenders may participate (syndication), or a second lender takes the senior conventional tranche above the SBA guaranteed amount. Your broker (that's us) coordinates this.

What Documentation You Need

For a medical practice acquisition SBA loan, expect to provide:

From the buyer:

2 years personal tax returns

Personal financial statement (SBA Form 413)

Resume and medical credentials

Medical license, DEA registration, board certifications

Malpractice history (any adverse actions disclosed upfront)

From the practice (seller provides):

3 years practice tax returns or financial statements

Accounts receivable aging report (60/90/120-day buckets)

Payer mix breakdown (% commercial, Medicare, Medicaid, self-pay)

Patient visit volume by year (trending up/flat/down matters)

List of key employees and compensation

Lease terms or real estate details

Equipment list with age and condition

From the deal itself:

Letter of intent (LOI) or purchase agreement

Practice valuation (independent appraisal often required)

Transition plan — how long will the seller stay? Under what agreement?

The Transition Plan: Why Lenders Focus on It

For a physician practice acquisition, the biggest risk isn't balance sheet — it's patient retention. Will patients follow the new physician, or will they leave when the seller walks out the door?

Lenders want to see a credible transition plan:

Seller remains as employed or contracted physician for 6–12 months minimum

Seller introduces the acquiring physician to patients in writing and in person

Seller is contractually restricted from opening or joining a competing practice within a defined radius for 3–5 years

The practice has a brand identity and patient base beyond the selling physician personally

Practices where the seller is the only physician and has a strong personal relationship with every patient are harder to finance. Practices with multiple providers, an established brand, and systems-driven patient flow are easier.

Common Mistakes That Kill Acquisition Deals

No non-compete agreement: SBA lenders require a non-compete from the seller. If the seller won't sign one, be very cautious — and the lender may walk.

Declining revenue trend: Three years of declining patient visits or revenue is a red flag. Understand why before you buy.

Accounts receivable problems: High DSO or a pile of 90-day+ AR suggests billing or collections problems you'll inherit. Get a billing audit before you commit.

Overpriced deal: SBA lenders do an independent valuation. If your purchase price is substantially above what the lender's appraiser comes in at, the lender won't finance the gap. Get an independent appraisal early.

Undisclosed malpractice history: Always surfaces. Disclose upfront with context.

Timeline: From LOI to Close

Day 1: LOI signed, pre-approval from 3A Lending

Days 2–14: Documentation gathering, practice valuation ordered

Days 15–30: Lender underwriting, SBA submission prepared

Days 30–45: SBA authorization

Days 45–60: Closing, funds transfer, transition begins

Start with a 24-hour pre-approval at 3A Lending — before you sign an LOI, know your financing options.