Everything You Need to Know About Healthcare
Healthcare loans for doctors just got more expensive, a...
March 3, 2025
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A new practice is rarely financed with a single product. Most owners combine a term loan or SBA loan for setup, equipment financing for the big purchases, a line of credit for working capital, and some personal cash. The hard part is not picking a product. It is working out how much you need before the first insurance payments arrive, and whether you actually qualify for the loans you are counting on. This guide explains how to finance a private practice step by step, from building a realistic budget to the 2026 SBA eligibility change that catches many clinicians off guard.
Start with the number, because every product decision depends on it. A published guide from Business News Daily quotes healthcare consultant David J. Zetter advising new owners to aim for at least $100,000 for equipment and startup costs, and to try to secure a separate $100,000 line of credit for payroll and bills until revenue stabilizes. Treat that as one expert’s rule of thumb, not a universal figure. A solo primary care office, a dental practice and an imaging-heavy specialty will land in very different places.
A more reliable approach is to build your own budget in three layers.
Layer | What it covers | Where owners get caught out |
|---|---|---|
One-time setup | Build-out, furniture, medical equipment, IT and EHR setup, signage, legal and entity formation, deposits | Construction delays. Zetter warns that a project planned for a June opening can slip to August if a fit-out is needed. |
Insurance and licensing | Malpractice, general liability, workers’ compensation, state licenses and registrations | Lenders often require specific coverage before closing, so quote these early. |
Runway | Payroll, rent, supplies, billing, software and loan payments until collections cover them | Revenue arrives late. Consultant Max Reiboldt notes in the same article that payers pay with a long lag on top of the capital you have already invested. |
The runway layer is the one most first-time owners underestimate. Payer credentialing is a big reason. The Business News Daily guide says credentialing can take up to three months and suggests allowing as much as five in case something goes wrong. Timelines vary by payer and state, so confirm them with each payer you plan to join, and start those applications while your financing is still in review.
The numbers below are assumptions for illustration only. They are not benchmarks, and your costs will differ.
Item | Assumption | Amount |
|---|---|---|
One-time setup (build-out, equipment, IT, deposits, legal) | Assumed | $180,000 |
Monthly operating costs | Assumed | $45,000 |
Runway before collections cover costs | Assumed 6 months | $270,000 |
Total capital needed | $450,000 |
Now suppose that total is funded with a $300,000 term loan, $100,000 of equipment financing and $50,000 of personal cash. If the term loan carried a 10 percent rate over 10 years (an assumed rate, not a quote), the payment would be about $3,965 a month. That payment starts shortly after funding, while patient volume and insurance payments are still ramping up. This is why a budget that only covers setup costs fails so often: the loan payment becomes part of your monthly burn before revenue can carry it.
You can test your own figures with the loan calculator on National Medical Funding’s loan durations page.
SBA-backed loans are often the first option clinicians research, and for good reason. The SBA’s 7(a) program allows loans up to $5 million, and eligible uses include working capital, equipment, furniture and supplies, and changes of ownership. But a rule change in 2026 has made eligibility the first question to settle, not the last.
SBA’s policy notice 5000-876441 revised its citizenship and residency guidance effective March 1, 2026. Under the companion procedural notice (text hosted by NAGGL), SBA financing is limited to applicants whose direct and indirect owners and SBA-required guarantors are all U.S. citizens or U.S. nationals with a principal residence in the United States. The notice lists lawful permanent residents (green card holders) and visa holders among the ineligible categories, and it combines the ownership of married spouses when applying the rule.
In practical terms, if you or a partner, co-owner or required guarantor is a green card holder or visa holder, SBA 7(a) and 504 financing is generally unavailable under the current rules. SBA’s lender resources page also lists an updated lender manual, SOP 50 10 8.1, taking effect October 1, 2026, and policies like this can change again. Confirm current eligibility with a lender before you build a capital plan around an SBA loan.
This does not mean financing is out of reach. Conventional bank loans, equipment financing, lines of credit and other products set their own criteria. It simply means you should know early which path you are on.
Each product solves a different problem. Matching the product to the cost it is meant to cover keeps you from paying for flexibility you do not need.
Option | Best suited for | Limits to know |
|---|---|---|
SBA 7(a) loan | Setup costs, equipment, working capital, longer repayment | Citizenship rule above; more documentation; slower than most alternatives |
SBA 504 loan | Major fixed assets such as real estate and long-lived equipment | Designed for capital assets, not day-to-day operating cash |
SBA microloan | Smaller needs, up to $50,000, through nonprofit intermediaries | Terms of six years or less; amounts may be too small for a full launch |
Equipment financing or leasing | Imaging, exam room and diagnostic equipment | The equipment typically secures the financing; does not fund payroll or rent |
Line of credit | Smoothing the gap between expenses and collections | SBA’s Working Capital Pilot requires 12 months of operating history, so new practices usually look elsewhere |
Short-term term loan or advance | A specific, time-limited gap | Usually the most expensive per dollar; see the section on cost below |
Personal funds, home equity, partners | Reducing how much you borrow | Puts personal assets or ownership at stake |
The SBA descriptions above come from the agency’s lender resources page, which compares the 7(a), 504 and microloan programs. For an overview of the loan types National Medical Funding offers healthcare professionals, including SBA, USDA and commercial real estate options, see its healthcare loans page.
Because the 7(a) is the program most startup clinicians ask about, the details matter. These come from SBA’s published program information, so you can hold any lender’s offer up against them.
For a closer look at how the 7(a) differs from the 504 for medical practices, read National Medical Funding’s guide to SBA 504 vs. 7(a) for medical practices.
Speed deserves a caution. SBA publishes its own review turnaround, but the full process, from application to funds, also includes your lender’s underwriting and closing. Ask any lender for its expected timeline in writing and build that into your lease and equipment commitments.
Equipment is often the largest single purchase, and the choice between financing and leasing changes your cash flow. Financing generally means you own the equipment and the lender takes a security interest in it. Leasing can lower your upfront cost, but you may pay more over the full life of the agreement and may not own the equipment at the end unless the contract provides a buyout.
Three questions help sort this out. How quickly will the equipment become outdated? Imaging and diagnostic technology can age faster than exam tables. How much will the equipment generate in revenue, and when? And what are the tax consequences of each structure? Depreciation and deduction rules change, so have your CPA review any equipment contract before you sign.
Buy only what your first-year patient mix requires. The Business News Daily guide recommends a conservative approach to equipment and furniture at the start, with upgrades following once the practice is established.
Short-term products can be useful for a specific, temporary gap, such as covering a deposit while a larger loan is in underwriting. They are a poor fit for funding recurring payroll month after month, because their cost is typically higher and repayment is faster.
Many short-term products are priced with a factor rate instead of an annual percentage rate. Here is a hypothetical illustration. A factor rate of 1.3 on a $50,000 advance means you repay $65,000 no matter how quickly you pay it back. If you repay that over six months, the annualized cost is far higher than the 30 percent that the factor rate suggests, and it can approach triple digits. The numbers are made up, but the lesson is real: a low-looking factor rate and a short repayment window can combine into a very expensive loan.
Before you accept any short-term offer, ask for these in writing:
Some states require standardized cost disclosures. New York’s Department of Financial Services adopted a regulation implementing its Commercial Finance Disclosure Law for commercial financing of up to $2.5 million. Which rules apply to you depends on your state and the provider, so ask your lender how it handles disclosures.
A startup practice has no tax returns and no collections to show, so lenders lean on other evidence. SBA’s lender guidance says lenders may consider a business credit scoring model, the credit scores or history of applicants and guarantors, cash flow, equity and collateral. There is no single cutoff that applies everywhere.
A credible pro forma. The Business News Daily guide recommends a pro forma that projects at least three years, sometimes up to five, with the cost of the lease, EHR, supplies and staff explained line by line. Zetter’s advice is to be able to explain how each number was built. Bankers can tell realistic projections from optimistic ones.
Your personal finances. Many lenders look at the owner’s credit and net worth, and many clinicians carry significant education debt. The same guide notes that a negative net worth after school loans can make a traditional bank loan tricky, which is why a realistic projection and a conservative budget matter so much.
Personal guarantees. Lenders commonly ask owners to personally guarantee a business loan, and SBA rules refer to required guarantors. Understand what you are signing: if the practice cannot repay, your personal assets can be at risk.
Healthcare-specific knowledge. The guide suggests approaching a bank’s medical or dental division, if it has one, because those teams understand reimbursement lag and healthcare operating costs. It also recommends submitting your request to five to ten banks to compare terms.
Ask each lender for its exact document list, since SBA notes that application contents vary by loan size and lender. A typical package often includes the following:
Opening a practice is not the only route to ownership, and it is worth being clear-eyed about the landscape. The American Medical Association’s Physician Practice Benchmark Survey reports that the share of physicians in private practice fell from 60.1 percent in 2012 to 42.2 percent in 2024, and the share who describe themselves as owners fell from 53.2 percent to 35.4 percent. The AMA’s analysis cites payer negotiations, resource costs and administrative demands as drivers. That is not an argument against opening a practice. It is a reason to build in more margin than you think you need.
Buying an existing practice can change your financing picture because there is revenue history to underwrite, though it brings its own costs and risks. National Medical Funding’s guide to medical practice buyout financing covers that path in detail.
Sometimes, but approval is never guaranteed. SBA lists starting a business as an eligible use of 7(a) loans, and lenders weigh credit, cash flow, equity and collateral. With no revenue history, your pro forma, credit profile, personal financial position and the cash you invest yourself carry more weight. Different lenders reach different decisions on the same application, so compare more than one.
Under current SBA rules, generally no. Since March 1, 2026, SBA financing is limited to applicants whose owners and required guarantors are U.S. citizens or U.S. nationals living in the United States. Other financing, such as conventional bank loans or equipment financing, may still be available. Rules can change, so confirm with a lender.
There is no single figure. Lenders set their own equity requirements, and they vary by loan type, credit strength and how conservative your plan is. Ask each lender what it expects before you apply. Putting in some of your own capital also lowers how much you borrow and shows lenders you share the risk.
It depends on the product and the lender. SBA loans generally take longer than other options because of underwriting and closing, so ask for a written timeline. Separately, payer credentialing can take months, and the Business News Daily guide suggests planning for up to five. Plan your opening date around the slower of the two, not the financing alone.
Often both, though it depends on the loan. For SBA loans of $50,000 or less, SBA does not require collateral. Above that, the lender applies its own collateral policy. Lenders commonly request personal guarantees from owners, and equipment financing is typically secured by the equipment itself. Ask exactly which of your assets are pledged.
Not always, but cost matters. A short-term product can help with a specific, temporary gap. It is usually a poor way to cover recurring expenses because the repayment period is short and the cost per dollar is often high. Request the total repayment amount and any estimated APR in writing, and compare it against lower-cost options.
Learning how to finance a private practice comes down to a few decisions made in the right order. Size the full budget, including the months before collections catch up. Confirm whether SBA financing is available to every owner and guarantor. Match each product to the cost it is meant to cover. Then compare offers on total cost, collateral and timing, not just the headline rate.
If you want to talk through your situation, National Medical Funding works with healthcare professionals on term loans, SBA loans and equipment financing. You can start an application and describe where you are in the process. Approval, rates, terms and timing depend on your credit, the product and the lender, and nothing in this article is a guarantee of financing or financial, tax or legal advice. Review your plan with a qualified CPA and attorney before you sign.
