SBA Loans for Physicians: Eligibility, Process & Pros/Cons
For many healthcare professionals, setting up or expanding a private practice is a major milestone—and money-maker. Rent the place, buy the diagnostic equipment, and the expenses would quickly mount up. There come SBA loans for physicians, providing flexible government-backed financing with attractive terms. These loans are among the single most common loans for doctors looking for sustainable long-term funding.
This article explores every small detail about SBA loans for doctors and medical professionals and covers eligibility, the application process, benefits, and drawbacks. Having understood your options, one can move towards securing the right kind of funding to build or grow a practice.
What Are SBA Loans?
SBA loans are loans given to business entities through commercial banks. But these commercial banks pay a part of the loan amount, which is more or less guaranteed by the SBA, thereby raising the trust among lenders. Due to this sort of guarantee, lenders lower down interest rates and offer longer repayment periods.
Why SBA Loan Programs Make Good Loans for Physicians
Unlike alternative financing, an SBA loan gives terms that actually benefit healthcare professionals. Since doctors are viewed as low-risk borrowers, many lenders will be willing to lend money to either newly established or expanding practices.
SBA loans can essentially be used for just about anything:
- The purchase and renovation of a medical office
- Acquiring expensive medical equipment
- Hiring staff and paying salaries
- Refinancing business-related debts
- Working capital requirements
Due to the flexible use cases, SBA loans are generally considered to be great financing options for physicians looking to scale without exhausting their personal savings.
Eligibility Criteria for Physicians
Physicians must meet certain requirements set by the SBA and the individual lenders to obtain SBA loans. These include:
Credit Score: A minimum score around 680 is considered acceptable, while higher scores improve the chances of getting approved and better loan terms. Most lenders would prefer physicians to have good personal and business credit histories.
Time in Business: SBA lenders will most often give loans to businesses with at least 2 years of operations, though new practices could still qualify. Startups may have to back a strong business plan with projected revenue.
Annual Revenue: Lenders want to see if the business has enough income to repay loans. Requirements vary but typically begin at $100,000 in annual gross revenue.
Collateral: Not always a condition, but some SBA loans—more so the large ones—may require collateral against business assets or a personal guarantee.
If you fit those requirements, small business loan programs for medical practitioners under the more popular SBA programs will surely be available to you.
Types of SBA Loans for Physicians
Two kinds of SBA loans are the ones usually sought by physicians:
SBA 7(a) Loan: The most flexible form of SBA loan. It can be taken for working capital, expansion, debt refinance, and purchase of equipment. Loans can be extended up to $5 million with repayment terms up to 25 years for real estate and 10 years for working capital. Interest rates generally range from 6 to 10%.
SBA 504 Loan: Used mostly for purchasing fixed assets such as commercial land or big equipment. These deals are partnered with funds from a private lender and a Certified Development Company (CDC), thus granting terms of up to 25 years with low fixed interest rates.
Both types are some of the best loans for physicians, granting them with steady, expected repayment terms. So, it’s not hard to get medical practice loans.
The Application Process
An SBA loan is highly sought after, and the application process is often detailed and time-consuming; however, being prepared in advance increases your chances of success.
Step 1: Prequalification
Prequalification is typically done based on your credit score, your revenue for a certain period, and your practice history.
Step 2: Gather Documentation
These documents include your business license, the last three years of tax returns (both personal and business), and your most recent profit and loss statement, balance sheet, debt schedule, and detailed business plan.
Step 3: Submit Full Application
After prequalification, submit a full loan application and documents needed to support it. Other requirements may include a personal financial statement and a collateral evaluation.
Step 4: Underwriting and Approval
Here, lenders evaluate your creditworthiness and capacity to repay the loan, along with verifying the final purpose of the loan documentation. This process lasts from two to six weeks, mostly dependent on the loan’s size and complexity of the documentation.
Step 5: Closing and Disbursement
When the loan gets approved, you must sign a loan agreement and then get disbursed with the loan amount in full or in stages, again based on the loan type.
This is a lot more detail oriented than your typical physician loan; however, the good interest rates will make it worth your effort.
Final Thoughts
Looking to grow your practice sustainably, the SBA loan is arguably the best loan available to physicians. Although the process may be a bit complicated compared to other financing options, you do, however, enjoy lower-interest rates, longer repayment terms, and high loan amounts as a trade-off.
If you are a physician with good finances and a very clear growth strategy, an SBA loan gives you the funding to elevate your practice beyond its current state. From building a new clinic to upgrading medical equipment, these loans for physicians provide the flexibility and support to sustain a practice in the fierce healthcare competition.
