How to Finance a Private Practice: Costs, Loa
A new practice is rarely financed with a single product...
June 5, 2025
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Ask a practice owner why they want to consolidate medical business debt and the answer is almost always the same: the monthly payments are too high. Consolidation can fix that. It can also quietly add tens of thousands of dollars in interest, and in 2026 the rules for doing it well have changed.
This guide covers what consolidation actually does, which debts belong in it, how the SBA’s refinancing rules work after the June 2025 rewrite and the October 1, 2026 update, and what the Fed’s September rate hike means for variable-rate debt. It also includes a worked example showing why the length of your new loan matters more than the rate. If you run a physician, dental, or specialty practice with more than one loan, this is the math to do before you apply.
80% of medical groups say Medicare pays below their cost of care | 84% report higher operating costs than a year ago | 7.00% prime rate since September 17, 2026 |
To consolidate medical business debt is to replace several existing obligations, such as term loans, equipment financing, credit lines, or business credit cards, with one new loan and one monthly payment. The aim is a lower total cost, a lower payment, or both. It is not debt forgiveness, and it does not reduce what you owe on day one.
You will see medical practice debt consolidation, refinancing, and healthcare debt consolidation loan used almost interchangeably. There is a useful difference. Refinancing replaces one loan with a better one. Consolidation combines two or more. Most practice deals do both at once, and the result should be judged by two numbers: the new monthly payment and the total you will repay.
Our overview of practice debt consolidation covers the basics. This article goes deeper on the decisions, the SBA rules, and the math.
Debt stacks up in medical practices for reasonable reasons. Each loan made sense when it was taken: an imaging system, a second location, a line of credit to bridge slow reimbursements. The trouble is the combined picture, which nobody designed.
The pressure is measurable. In a February 2026 poll, MGMA found that 80% of medical groups say Medicare reimbursement is below what it costs them to deliver care. A June 2026 MGMA poll found 84% of groups running higher year-to-date operating costs than the same point in 2025.
Relief from Medicare is uncertain. The 2026 conversion factor rose, but part of that increase was a one-year 2.5% adjustment from Congress. CMS’s proposed 2027 schedule would cut the conversion factor by 1.19% to 1.68%, according to DoctorsManagement’s analysis.
When revenue per visit is flat and costs keep climbing, fixed debt payments take a bigger bite each year. That is the real reason owners look at consolidation. They did not mismanage anything. Payment structures built for last year’s cash flow simply no longer fit.
Rank your debts by cost, not by balance. The most expensive obligations are where consolidation pays off, and the cheap ones are often better left alone.
Debt type | Worth consolidating? | Why |
Working capital and short-term loans | Often yes | Highest cost and shortest terms, so the payment relief is largest |
Business credit cards | Often yes | High variable rates; SBA rules give card debt an exception to the 10% payment test |
Merchant cash advances | Special case | SBA restrictions apply; see the MCA section below |
Variable-rate lines of credit | Depends | Tied to prime, so cost rose with the September rate hike |
Equipment loans | Sometimes | Keep low fixed-rate or nearly paid-off loans; rolling them into a longer term adds interest |
Existing SBA loans | Rarely | Usually already low cost; refinance only if the terms improve clearly |
Seller notes from a practice purchase | Rules tightened | SOP 50 10 8.1 adds a 36-month seasoning requirement |
Debt consolidation for doctors usually runs through one of four routes. Each solves a different problem.
Option | Best for | Watch for |
SBA 7(a) refinance | Practices with a clean payment history and expensive debt. Loans go up to $5 million, with terms up to 10 years without real estate and 25 with it | The 10% payment-reduction test, a personal guarantee from 20% owners, and heavier documentation |
Specialty term loan | Faster funding and fixed payments when SBA timing or eligibility is a problem | Shorter terms mean higher payments; compare total cost, not just the payment |
Line of credit | Flexibility for cash flow swings | A poor home for consolidated debt, since the rate floats with prime |
Equipment refinance | Practices where financed equipment is the largest piece of the stack | Collateral is the equipment, so terms track its useful life |
A single healthcare debt consolidation loan does not have to be the answer. Many practices get the best result from a mix: one new loan for the expensive debt and existing loans left in place.
An SBA 7(a) loan can refinance existing business debt, but the SBA sets conditions. The rulebook is SOP 50 10, and the current version has been in force since June 1, 2025. In practice, lenders check five things:
The SBA’s 7(a) terms and eligibility page lays out the program basics.
SOP 50 10 8.1 replaces the current version for loans that receive an SBA loan number on or after October 1. It moves the refinancing rules into a single appendix and lets lenders refinance their own debt under delegated authority, which should speed up some files. The NAGGL summary is a good starting point, and Coleman Report outlines the refinancing changes, including the new 36-month seasoning period for seller-financed acquisition debt. Because the rule follows the loan number rather than the application date, ask your lender which version will govern your file.
This is where many practice owners get bad information. Since June 1, 2025, the SBA has not allowed 7(a) proceeds to refinance merchant cash advances or factoring agreements. Some lender websites still describe MCAs as prime candidates for SBA consolidation, and that is out of date.
The October 1 update adds a narrow exception. Lender summaries say active advances remain ineligible, but MCA-originated debt can qualify if it was converted to a term loan, has amortized for at least 24 months, and has had no further advances. That wording comes from secondary sources, so have your lender confirm it against the SOP before you build a plan around it.
If your MCA is still active, you have other paths:
Be careful with so-called reverse consolidation, where a new advance is used to cover payments on an old one. It adds a second factor rate and another daily debit on top of debt that was already hard to carry. Also remember that factor rates translate into effective annual rates that often run from 60% to over 300%, and paying early usually does not reduce what you owe, because the payback total is fixed at signing. Lenders also count existing MCA payments in debt service coverage, so an active advance can weaken an otherwise strong application.
On September 16, 2026, the Federal Reserve raised the federal funds target range by a quarter point to 3.75% to 4.00%. Prime moved from 6.75% to 7.00% the next day. Any debt priced off prime, including variable-rate credit lines and variable-rate SBA loans, repriced upward. Some rate tables online still use the old 6.75% base, so check the date on any rate you read.
Nobody can predict the next move, and the next FOMC meeting is October 27 and 28. The useful question is how much of your debt floats. If a large share moves with prime, a fixed-rate consolidation removes that exposure in exchange for locking in today’s rate. If most of your debt is already fixed and cheap, waiting costs you little.
Consider a practice with two debts. A working capital loan has a $120,000 balance, 24 months left, and an effective rate near 30%. An equipment loan has a $90,000 balance, 30 months left, and a 9% rate. The combined payment is about $10,072 a month, and the practice will repay about $261,900 in total. Here is what three choices look like at an assumed 10% rate for the new loan.
Scenario | Monthly payment | Total repaid | Versus today |
Keep both loans | $10,072 (drops to $3,362 after month 24) | $261,900 | Baseline |
Consolidate both into a 10-year loan | $2,775 for 120 months | $333,000 | About $71,100 more |
Refinance only the 30% loan into a 5-year loan | $5,912 for 30 months, then $2,550 through month 60 | $253,860 | About $8,040 less |
The 10-year option cuts the monthly payment by 72%, and it is the most expensive choice by far. The five-year option cuts the payment by more than $4,000 a month for the first 30 months and still saves money overall. The lever was not the rate. It was the term, and it was leaving a cheap loan alone.
These figures are illustrations, not offers. They exclude fees, and your rates and terms will differ. Still, the pattern holds for most practices: consolidate the expensive debt, keep the cheap debt, and choose the shortest term your cash flow can carry.
The current picture is more nuanced than “consolidation improves your credit score.” Most business loans report to business credit bureaus such as Dun & Bradstreet, Equifax, and Experian, not to your personal file. Two things can still reach you personally. The lender usually runs a hard inquiry, which typically lowers a personal score by a few points for a short time. And SBA loans require a personal guarantee from 20% owners, so a default can land on your personal credit.
Consolidation helps your credit only indirectly: fewer missed payments, lower utilization on cards, and a cleaner payment history over time.
Preparation improves both your odds and your terms. Start with a one-page list of every debt: lender, balance, rate, monthly payment, and maturity date. Gather 12 months of payment history and be ready to explain any late payment. Have recent financial statements and tax returns on hand.
Then ask every lender the same questions:
Healthcare lending solutions work best when the lender understands how reimbursement cycles, payer mix, and equipment cycles shape practice cash flow. For a broader look at the options, read our guide to healthcare financing solutions for medical practices and our roadmap for long-term practice financing.
National Medical Funding works with medical professionals on consolidation and refinancing. Send us your debt list and we will show you the payment and total-cost comparison before you commit to anything.
Yes, in many cases. An SBA 7(a) loan can refinance eligible business debt if the old debt has been current for 12 months, the new payment is at least 10% lower (with exceptions for balloon or demand notes, business credit cards, and HELOCs), and the lender documents that the refinance does not shift a loss to the SBA. Active merchant cash advances remain excluded.
Not while it is an active advance. The SBA has barred MCA refinancing since June 1, 2025. Under SOP 50 10 8.1, lender summaries describe a narrow path for MCA debt that was converted to a term loan, has amortized at least 24 months, and has no newer advances. Confirm the exact wording with your lender before planning around it.
Applying usually triggers a hard inquiry, which typically costs a few points temporarily. Most business loans report to business bureaus, but SBA loans require a personal guarantee from every 20% owner, so a default can reach your personal credit. On-time payments help your business credit profile. Consolidation alone does not raise a score.
Usually only the most expensive debt. Low-rate fixed equipment loans and nearly paid-off balances are cheap to keep, and rolling them into a longer loan adds years of interest. In the example above, refinancing only the 30% loan into a five-year term saved money and cut the payment, while folding everything into ten years cost about $71,100 more.
For a 7(a) refinance, the new installment generally has to be at least 10% lower than the payments on the debt being replaced. Balloon and demand notes, business credit cards, and HELOCs are common exceptions. Lenders also want a clean recent payment history and a written explanation of why the refinance benefits the practice.
Nobody can time rates reliably, so focus on exposure. Prime rose to 7.00% on September 17, and the next Fed meeting is October 27 and 28. If a large share of your debt floats with prime, a fixed-rate consolidation removes that risk. If your debt is already fixed and cheap, waiting costs you little.
Refinancing replaces one loan with a new loan on better terms. Consolidation combines several debts into one. Most practice deals do both at once. Judge either by total cost and monthly payment together, never the interest rate alone.
Rates and rules reflect information available as of September 30, 2026, and may change. SBA eligibility is set by the SOP in force when a loan number is issued, and every loan is subject to lender approval. This article is educational and is not financial, legal, or tax advice. Talk with your accountant and lender before making decisions. More questions? Visit our healthcare financing FAQs.
A new practice is rarely financed with a single product...
