How Independent Healthcare Business Owners Can Benefit From SBA 504 Small Business Financing

It’s well known that healthcare is a growing industry. With $3.65 trillion spent by Americans in 2018; annual growth rates of over 5%; and projections of national healthcare spending at over $5 trillion by 2026, it is no wonder that many medical business owners are experiencing record-setting growth. Opportunities for office and clinic expansion, equity building, and equipment investment have never been more plentiful. What’s more, medical business owners often qualify for specialized financing through the Small Business Administration (SBA) 504 Loan Program; a program that ensures small business owners benefit from the long-term investment of property ownership.

So what is the SBA 504 Loan Program?

The Small Business Administration 504 loan program facilitates partnerships between nonprofit Certified Development Companies (CDC), such as TMC Financing, which administer the SBA portion of the loan; and conventional lenders, such as a banks or credit unions. The 504 program allows small-business owners to finance commercial real estate and other fixed assets with long-term, below-market, fixed interest rates. The purpose of this program is to assist in community development; provide equitable access to commercial real-estate capital for woman- and minority-business owners; and to assist small business owners in gaining ownership of their fixed commercial assets.

How is the SBA 504 Loan Structured?

Typically, a 504 loan is structured with 10-percent down from the business owner; 40-percent through the SBA/CDC, and 50-percent from a conventional lender. The benefits of this structure for the business owner are threefold:

  • Only 10-percent down-payment versus 20-to-40-percent down in conventional loans
  • Long amortization schedules (up to 25 years to pay back)
  • Below-market fixed interest rates

Why should medical business owners buy their building through 504 program?

There are several reasons why owning your business location is a good idea:

  • Protects from rising rental rates, particularly when combined with fixed-rate SBA 504 financing.
  • You get to decide how your space is used and do not need the permission of a restrictive landlord.
  • It’s a solid investment. If you plan on practicing in your current location for 10 years or more, recommendations for medical businesses include the purchasing of the location. Why? Most likely, the medical office will be paid off in full within that time, and will have appreciated as a valuable asset.
  • You can sell the building and earn additional income. It’s not uncommon for the owner of a private medical or dental practice to sell their practice to a younger associate;
  • And you can continue leasing the building, which provides ongoing income. Independent owners of skilled nursing and assisted living facilities can also sell their businesses, and then lease their properties as separate entities.
What are ‘owner-occupied’ medical businesses and do they qualify for SBA 504 financing?

The range of businesses that could qualify for commercial real-estate lending extends across a wide spectrum, including:

  • Individual medical providers, like dentists, doctors, optometrists, physical therapists, or counselors needing more office or treatment space;
  • Medical and healthcare groups in the same class, with the same needs, seeking more room in which to provide treatments to patients;

While each of these facilities has unique real-estate needs, they are all considered ‘owner-occupied’ healthcare businesses, which makes them all eligible for SBA 504 financing.

How TMC Financing works for and with medical business owners to secure 504 funding:

TMC Financing has secured funding for many independent healthcare business owners so that they may purchase or expand their facilities. In 2018, TMC Financing assisted in the organization and allocation of over (AMOUNT) for healthcare facility procurement and project costs. The borrowers ranged in service from counselors and rehabilitation providers to dentists and surgical groups, as well as many more.The list below includes just some of those practitioners who benefited from the SBA 504 loan program through TMC Financing in 2018:

How TMC Financing can help you:

TMC Financing works with healthcare business owners to secure financing that works for them. As part of the small business community, TMC Financing strives to deliver all the benefits of the SBA 504 loan program to business owners, including:

  • Long-term, Fixed, Interest Rates, currently set at (AMOUNT)
  • No additional Collateral Needed
  • No Balloon Payments
  • Equipment Financing
  • As little as 10% down

One of the best aspects of the 504 program is nearly all for-profit businesses are eligible. However, the business must occupy at least 51 percent of the building. If the financing is for the construction of a new building, the business must occupy 60 percent of the building.

About TMC Financing:

TMC Financing is one of the nation’s top-ranking CDCs and a Premier Certified Lender with the SBA. If you are thinking about buying your own commercial property, talk to one of our local 504 loan experts. Regardless of where you are in the process—whether you have a building picked out or are just hearing about the 504 option for the first time—TMC Financing can help guide you through the next steps, from the prequalification process through the duration of your loan.

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