What does acquisition financing typically cover?
An acquisition loan can often cover the purchase price, which includes goodwill such as the patient base and reputation, plus equipment, furniture and sometimes inventory. Many buyers also include working capital for the transition, because collections can dip while payers update enrollment and patients adjust to a new owner. Real estate is usually handled separately.
Common buyers include an associate physician buying a retiring owner's practice, a chiropractor purchasing a clinic in a neighboring town, a physical therapist acquiring a clinic from its founder, an optometrist taking over a colleague's practice, and a veterinarian buying the hospital where they already work. The structure is similar across specialties; the details of what drives value differ.
How do funders decide how much to lend?
Funders typically start with the practice's historical cash flow after the owner's pay, then check how comfortably it covers the new loan payment plus the buyer's reasonable salary. They look at collections trends, payer mix, provider concentration, equipment condition and the buyer's credit and experience. The price you agreed to does not decide the loan amount; cash flow does.
If the price is higher than the cash flow supports, the gap usually comes from the buyer's own funds or seller financing, where the seller accepts part of the price over time. Many deals use some combination. Have a CPA review the practice's financials and an attorney review the purchase terms; MedicalBizFunding does not give legal or tax advice.
What happens between the letter of intent and closing?
After a letter of intent, the buyer reviews the practice's financials, contracts, leases, staff and equipment, often with a valuation. The funder reviews the same documents plus the buyer's finances. Then come the purchase agreement, lease assignment or new lease, payer enrollment planning and closing. Each step adds time, so plan for weeks to months.
- Letter of intent with price, structure and timeline
- Due diligence: tax returns, collections by payer, A/R, contracts, staff, equipment
- Financing application and valuation
- Purchase agreement and lease arrangements
- Payer enrollment and transition planning
- Closing and funding
Why do collections often dip after a purchase?
Ownership changes can require payer enrollment updates, and payments may slow while that happens. Some patients leave when a long-time provider retires, staff may turn over, and billing systems may change. Timelines vary by payer. Transition working capital included in the financing, or a line of credit, protects the practice while collections return to normal.
Ask the seller to stay through a transition period to introduce patients and referral sources. Keep key staff with retention plans where possible. For more on protecting cash flow during changes, see covering payroll while claims are pending and the practice line of credit.
Conventional loan or SBA loan for a practice purchase?
Both are used. Conventional acquisition loans can close faster, which matters when a seller wants a quick transition. SBA loan options can offer longer terms but take more documentation and time. The right choice depends on your timeline, the size of the deal and how much documentation the practice and buyer can provide.
Compare conventional term loans with SBA loan options side by side on total cost and timing. Build the financing timeline into the purchase agreement so a delay does not break the deal.
What do funders need for a practice acquisition?
Expect to provide the letter of intent or purchase agreement, several years of the seller's tax returns and collections history, A/R and payer mix summaries, an equipment list, the lease, the buyer's personal financial statement, tax returns and resume, and a transition plan. Requirements vary by product and funder; many look at time in business, monthly revenue and credit.
Never send patient lists, charts or any patient information to a funder; financial summaries are enough. See the document checklist and what funders review before you apply.
Frequently asked questions
How much of the purchase price can be financed?
Many acquisition funders typically finance a large share of a well-documented purchase for qualified buyers, but it depends on the practice's cash flow, the buyer's credit and experience, and the deal structure. Some deals add seller financing or buyer funds to close the gap.
Why does an ownership change affect collections?
Payer enrollment and billing may need updating under the new owner, and payments can slow during that process. Patients and staff may also adjust to the change. Timelines vary by payer, so transition working capital is a common part of acquisition financing.
Can working capital be included in the loan?
Often, yes. Many buyers include working capital to cover payroll and operating costs during the transition. Size it to a conservative estimate of how long collections will take to return to normal under new ownership.
Is SBA financing required to buy a practice?
No. Conventional acquisition loans are available, and SBA loan options are one path to compare. SBA processes usually take longer and require more documentation. Choose based on total cost, timing and how the seller wants to close.
Which practice types does this cover?
Physician, chiropractic, physical therapy, rehab, behavioral health, eye care and veterinary practices, among other healthcare practices. The financing structure is similar, while what drives value, such as provider retention, payer mix or equipment, differs by specialty.
Have a practice in mind?
Apply before signing a letter of intent so you know what the deal can support.
Updated September 14, 2026 · MedicalBizFunding Team