How to Access Practice Acquisition Financing

There’s more to acquiring a healthcare practice than just securing a loan. At James Moore, we’ve seen that successful deals start with a clear strategy, not just a spreadsheet.

Whether you’re expanding your footprint or transitioning ownership, the path to practice acquisition financing can shape your growth for years to come. And while it might seem like a numbers game, getting the funding you need is more about alignment, between your goals, your practice model and the lender who believes in your vision.

Practice acquisitions are on the rise across the country, particularly in specialties like primary care, dentistry and behavioral health. With an aging population, greater demand for access and more independent practitioners looking to retire, there are real opportunities for healthcare organizations to grow. But these opportunities often come with one big barrier: access to capital.

That’s why understanding the full range of financing options is essential. Whether you’re exploring SBA loans, partnering with your bank or structuring a creative seller agreement, choosing the right approach can reduce risk and open doors. In this guide, we’ll explore the most common acquisition financing strategies. We’ll also cover what lenders look for, how to prepare your financials and how working with an experienced advisory team like ours can make the process smoother.

 

 

SBA 7(a) loans: Affordable, flexible and popular

If you’re looking for a government-backed financing option, the SBA 7(a) loan is one of the most accessible programs for healthcare practice acquisitions. Backed by the U.S. Small Business Administration, these loans are ideal for both first-time buyers and expanding medical groups.

The appeal of the 7(a) loan is its flexibility. You can borrow up to $5 million and use it for a range of expenses, from goodwill and real estate to equipment, working capital and transition costs. According to the SBA, typical loan terms range from up to 10 years for non-real-estate purpose loans and up to 25 years for loans to acquire or improve real estate.

However, there is a minimum 10% equity injection requirement for startups and complete changes of ownership. Also, SBA 7(a) loans almost always require a personal guarantee from any owner with 20% or more interest in the practice. This means your personal assets can be pursued if the business defaults, even if the practice is a separate legal entity.

Healthcare borrowers also benefit from competitive interest rates and long repayment terms. That’s helpful if your cash flow is still ramping up post-acquisition. Most lenders structure 7(a) loans as fully amortizing with fixed or variable interest rates tied to the prime rate.

While the SBA guarantees a portion of the loan, there are a few drawbacks. One major consideration to keep in mind for utilizing SBA 7(a) loans is prepayment penalties. For loans with a term of 15 years or longer, a prepayment penalty of up to 5% of the amount of the prepayment may be assessed. Another is the process itself can be heavy on paperwork. You’ll need to provide extensive documentation including your tax returns, interim financial statements, a business plan and your acquisition projections. Some healthcare buyers find this challenging without financial expertise on their side.

A few tips to increase your chances of SBA approval:

• Keep your personal and business financials current
• Prepare a detailed acquisition forecast, including revenue ramp-up assumptions
• Maintain strong credit and a documented history of healthcare operations

Lenders favor applicants who can clearly demonstrate their plan for success. This is especially important in the healthcare space where revenue cycles, payer contracts and provider licensing all play a role in performance.

In many cases, SBA 7(a) loans are ideal for solo physicians acquiring smaller practices or dental groups expanding to a second location. They also work well for buyers who want to preserve cash or need flexible use of funds.

Conventional bank loans: Healthcare-focused lenders can make a difference

For well-established healthcare organizations, conventional bank loans can be a strong financing option. These loans come directly from banks or credit unions and do not rely on government guarantees, which gives lenders greater flexibility in setting terms and conditions. This can result in faster decisions, more personalized repayment structures and competitive rates for qualified borrowers.

Healthcare practices often benefit from working with banks that have experience lending to medical, dental and other provider-based businesses. Lenders familiar with patient billing cycles, reimbursement timing and credentialing requirements tend to understand the nuances that affect cash flow and repayment ability.

A few signs that conventional financing may be the right fit include:

• Strong credit history
• Consistent profitability over at least two years
• A clearly defined acquisition and transition plan
• A history of leadership or ownership in a healthcare setting

One key difference from SBA loans is the down payment requirement. Most conventional lenders expect 10% to 20% down, depending on the size and type of the transaction. Some may also limit how much of the loan can be applied to goodwill or intangible assets unless supported by a valuation.

Another distinction is speed. Without a government guarantee to underwrite, many banks can issue credit decisions and close loans more quickly. That can make a difference in competitive deal environments where timing matters.

That said, this route is not without complexity. You will still need to present clean financial statements, a realistic forecast for post-acquisition performance, and details about your transition plan. Also, most banks will also require a personal guarantee, especially when goodwill makes up a large part of the loan. Some lenders may reduce the guarantee requirement if the loan is heavily secured by real estate or other collateral.

 

 

Seller financing: Why some deals start with trust

In healthcare practice acquisitions, seller financing is a tool that can open doors when traditional financing options fall short or when both parties want more control over the terms. With seller financing, the seller agrees to accept a portion of the purchase price over time rather than requiring the full amount at closing.

This setup usually involves a promissory note that outlines repayment terms, interest rates and a clear payment schedule. The buyer makes regular payments to the seller over a period of several years, allowing the deal to proceed even if third-party financing is limited. Sellers may also request a personal guarantee on their note to give them extra assurance of repayment, especially if the note covers a significant portion of goodwill.

Seller financing can be especially valuable in private transactions where:

• The buyer and seller have an existing relationship
• The seller is open to staying involved during the transition
• The practice is highly personalized, such as solo or small group operations
• The buyer needs flexibility to preserve working capital

This approach can provide tax advantages for the seller by spreading income over time, but specifics depend on actual asset allocation and recapture rules. It could also improve the chances of a smooth transition for patients and staff. For the buyer, it reduces the need for outside capital and often results in a more flexible repayment structure.

However, like any financial agreement, seller financing requires careful documentation. Key elements to consider include:

• A written note that details the repayment amount and schedule
• Interest terms that reflect current market conditions
• Security or collateral provisions
• Clauses for prepayment, default or changes in business ownership

It is also wise for both parties to consult their legal and tax advisors before finalizing terms. Clear expectations and accountability on both sides help prevent misunderstandings and ensure the repayment arrangement supports the long-term success of the practice.

Partner buy-ins: Structuring internal transitions the right way

Sometimes, the next owner of a healthcare practice is already working inside the organization. Partner buy-ins are a common path to ownership for associate physicians, administrators, or long-time team members. This internal succession strategy allows a rising leader to gradually acquire equity, preserving continuity and building long-term stability.

Partner buy-ins typically involve the current owner selling a percentage of the practice to the incoming partner, either all at once or over time. The terms can be structured to match the financial capacity of the buyer and the retirement or transition plans of the seller. These deals often include flexible financing arrangements, such as installment payments drawn from the new partner’s future distributions.

Key elements to address when structuring a partner buy-in include:

• The valuation method used to determine the purchase price
• The percentage of ownership being sold and the timeline
• Roles and responsibilities after the buy-in
• Decision-making authority and voting rights
• Compensation adjustments tied to ownership changes

Valuation is often the most sensitive part of the process. Some practices choose a formula based on earnings before interest, taxes, depreciation and amortization (EBITDA). Others use a fixed dollar value per patient or a blended method. Having a third-party valuation helps ensure fairness and transparency.

A properly structured buy-in can also improve retention and performance. When future owners have a financial stake in the practice’s growth, they’re more likely to make long-term decisions and support operational improvements.

What lenders will want from you: Financials, forecasts and preparation

Whether you’re applying for a traditional loan, an SBA product or even entering a seller-financed deal, lenders and stakeholders will expect clear documentation and a solid business case. Being prepared with the right financials can help you secure favorable terms and keep the acquisition process moving forward.

Here are the documents most lenders or sellers will ask for during the financing process:

• Three years of personal and business tax returns
• Year-to-date financial statements, including balance sheets and profit and loss reports
• Personal financial statement showing assets, liabilities and net worth
• Business plan that includes acquisition strategy, staffing and growth goals
• Pro forma financial projections for at least 12 months post-acquisition
• Debt schedule outlining any existing loans or obligations
• Information about professional licenses, certifications and liability insurance

In addition to documentation, lenders will review your credit score, liquidity, industry experience and historical practice performance. For healthcare borrowers, this means having detailed insight into payer mix, reimbursement cycles, staffing costs and any upcoming regulatory changes.

It’s also important to communicate how you plan to transition ownership without disrupting patient care. Lenders want to know that your billing systems, licensure updates and provider credentialing will continue without delay.

A clear path to financing your next chapter

Buying a practice is one of the biggest decisions you’ll make in your healthcare career. It is a financial, operational and personal commitment, and it deserves a strategy that fits your goals. Whether you pursue traditional bank loans, SBA funding, seller financing or a partner buy-in, the key is preparation.

With the right structure and support, your acquisition can become a springboard for growth and long-term success. At James Moore, we work closely with healthcare clients to prepare financial documentation, structure deals, develop buy-in agreements and answer lender questions.

Contact a James Moore professional to learn how we can support your acquisition planning, financial modeling and lender readiness. Together, we can chart a course that brings clarity to your transition and confidence to your next chapter.

 

 

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.