There are many reasons why you may want to secure a business loan for your medical practice. For example, you may want to buy the building where your practice is located, expand the building you own or expand to a new building, or upgrade your equipment. You will face complex choices when seeking financing. It is a good idea to look at a number of options, and especially to acquaint yourself with the Small Business Administration (SBA) 504 loan program, before committing to a source of financing.
Finding Financing for Your Medical Practice
Doctors hold a place of honor in our society, but that personal respect may not translate into great access to credit. You may face complicating factors that most other borrowers do not have, such as:
- a credit score affected by years of paying down large student loans
- uneven earnings history as you gain experience and establish your own practice
- exceptionally expensive equipment needs
- limited liquid collateral
Large banks are a steady source of loans to medical practitioners and many have programs especially for them. You are likely to find, however, that the rates advertised are offered on an extremely selective basis and for loans of a limited size. Also, loans with variable rates may hold unpleasant surprises in the future. This is a particular concern if you are looking at a specialized offer with a low introductory rate for medical practices.
Non-bank lenders, such as online lenders, may be more willing to loan to medical professionals, but they may require a high down payment and a balloon payment after a short number of years—maybe less than 10. And on top of that, the interest rate is likely to be at least 7%.
Financing Your Medical Practice With a 504 Loan
One way to circumvent these tricky loan situations is to look into getting a 504 loan. These loans are made through a partnership between between a Certified Development Company (CDC), such as TMC Financing, a conventional lender and you. It has three parts:
- The first is a loan from a conventional lender for at least 50% of the total amount. You and that lender determine the amount and conditions of that loan, which becomes your first mortgage.
- Your CDC facilitates a separate SBA loan of 40% of the total, up to $5 million, at a fixed, below-market rate. This will be your second mortgage.
- Then you, the borrower, will contribute 15% to the loan as down payment. This is the down payment required by the SBA for facilities classified as single-purpose properties, as many medical centers are. For non specialized properties, the down payment is 10%.
Banks are more inclined to loan to borrowers that team up with the SBA because they are ensured the first lien of a project they provided only 50% of the financing for. If you do not already have a conventional lender, TMC will be happy to help you find the right one to partner with for your 504 loan. You will receive SBA financing for a 10- or 20-year term (with a 25-year option coming soon) with no balloon payment.
Prequalifying for a 504 loan can determine your purchasing power and can set your offer apart from others in a competitive market. The only documents required to prequalify for a 504 loan are:
- three years of personal and business tax returns
- a personal financial statement
- interim financials
By prequalifying for a 504 loan as soon as possible, you can speed up the loan process considerably.
TMC Financing Client Success Stories
TMC has been privileged to help some of Nevada’s leading healthcare providers expand their practices. Dr. Eva Littman’s Red Rock Fertility is one of the most successful fertility clinics on the West Coast. TMC provided $1.7 million of the project’s $4.7 million total cost to purchase a new two-story, 12,500-square-foot building. Red Rock prides itself in successfully treating cases that other doctors have given little hope for. Before Dr. Littman opened her practice in 2008, the Las Vegas community was forced to travel to California for proper treatment.
St. Rose Pediatrics used a 504 loan from TMC to purchase an 8,430-square-foot facility in Henderson. The project was worth $1.96 million and provided the clinic with increased space and long-term stability of a secure operating location. The clinic was previously leasing space – allowing themselves to be at the mercy of a landlord and unpredictable rent increases.
Dynamic Pain Rehabilitation received an SBA 504 loan to purchase an 8,612-square-foot Green Valley. “Dynamic Pain Rehabilitation’s expansion allows our practice to offer more services to our patients,” Office Manager Elin Imas said. “The SBA 504 program helped us come up with the necessary funds to purchase an office building that allowed our practice to expand and move into a new and better location.” Imas’s husband, Dr. Alexander Imas, is the owner and manager of the clinic.
Monos Health Institute purchased a $1 million facility near Southern Hills Hospital using a 504 loan. The loan also included over $1 million in tenant improvements. The institute, which treats chronic pain and addiction, has seen an increase in patients and revenue every month since it opened in 2011. They were turning patients away before they purchased the new property. They now have three locations in Las Vegas and Henderson.
London Medical Management provides assistance with healthcare crisis management using the Patient PAL system, a high-level concierge service. They used a 504 loan to expand and remodel their 7,300-square-foot facility and in turn, were able to hire 24 new employees. “TMC walked with us every step of the way so we could have a successful outcome in the process,” CEO Jack London said.
You can find out more about how a 504 loan can help you expand your medical practice from one of TMC Financing’s 504 loan experts. TMC is an SBA Premier Certified Lender and a high-volume loan provider. With over 35 years of experience, TMC can help you find the financing that is best for you and guide you through the 504 loan process. Contact TMC Financing today.