What do practices finance with term loans?
Term loans usually fund growth projects with a long payback. The most common are leasehold build-outs for exam or treatment rooms, a second or third location, the purchase of an existing practice including its goodwill and equipment, an incoming clinician's buy-in, and larger renovations. Equipment for those projects is often financed separately.
- A physical therapy clinic building out a larger gym in a second suburb
- An optometrist buying a retiring colleague's practice with its patient base and exam lanes
- A primary care physician financing a buy-in to become a partner
- A veterinary hospital adding boarding and surgical space
Guides: build-outs, second locations, buying a practice.
How is a term loan sized?
Funders typically size a term loan from the practice's historical cash flow and how comfortably it can cover the new payment, alongside the owner's credit, existing debt and collateral. For a purchase, the seller's collections history matters. For a new location, funders look at the existing practice's strength and a realistic ramp-up plan.
Prepare a budget with every cost, not just construction or purchase price: design and permits, equipment, furniture, technology, signage, the rent overlap before opening, and working capital for the months when a new site or new owner has lower collections. Underfunded projects are a common reason practices come back for costly short-term money later.
How long do term loans take?
Longer than equipment financing or working capital. Build-outs need contractor bids and lease review, and funds are often released in draws as work is completed. Practice purchases need a letter of intent, the seller's financials, often a valuation and closing documents. Plan for weeks to months, and start before your lease or purchase deadline.
Build the financing timeline into your negotiations. Ask the landlord for a tenant improvement allowance and a rent start date after opening, and give the seller a closing date that leaves room for underwriting. See how the process works for each step.
What are the trade-offs?
Term loans usually cost less per year than short-term products, but they add a fixed payment for years and can require collateral and a personal guarantee. A longer term lowers the payment but raises total interest. Prepayment terms vary. The biggest risk is a project that ramps up slower than planned while payments start on schedule.
Stress-test the plan: what happens if the new location takes twice as long to fill schedules, or if payer enrollment under new ownership delays collections? If the practice cannot carry the payment in that scenario, reduce the project, extend the ramp-up cushion or phase the work. Some owners also compare SBA loan options for long-term projects when time allows.
What do funders review for expansion and acquisition loans?
Expect a fuller review than for short-term products. Funders typically ask for business and personal tax returns, bank statements, a collections summary, a debt schedule and project documents such as bids, the lease or the purchase agreement. Requirements vary by product and funder; many look at time in business, monthly revenue and credit.
For acquisitions, add the seller's tax returns and collections history, and a transition plan that covers provider retention and payer enrollment under the new owner. Share financial summaries only, never patient information. See the full document checklist.
What you’ll typically need
- Business and personal tax returns
- Recent bank statements and a collections summary
- Schedule of existing debts
- Contractor bid, lease, letter of intent or purchase agreement
- Project budget and ramp-up forecast
Frequently asked questions
Can a term loan cover goodwill when buying a practice?
Often, yes. Acquisition financing for healthcare practices commonly covers goodwill along with equipment and some working capital for the transition. How much of the price a funder will finance depends on the practice's cash flow, the buyer's credit and experience, and the deal terms, including any seller financing.
How is money released for a build-out?
Many funders release build-out money in draws tied to construction milestones or contractor invoices, rather than as one lump sum. That protects both sides but means your contractor schedule and the draw schedule need to line up. Ask how inspections and draw requests work before construction starts.
Does the lease affect a build-out loan?
Yes. Funders review the lease, especially its remaining length compared with the loan term, renewal options and who owns the improvements. A lease that ends before the loan does is a common problem, so negotiate the lease length with financing in mind.
Can an incoming partner finance their buy-in personally?
Many incoming physicians and clinicians finance their share with a term loan based on their income from the practice, their credit and the practice's financial history. The partnership agreement and valuation drive the amount. Have your attorney and CPA review the terms of the buy-in itself.
Is a personal guarantee required?
It is common for larger term loans to small practices, but it depends on the funder and the deal. A personal guarantee means you are responsible if the practice cannot repay. Understand exactly what you are signing, and ask whether the guarantee is limited in amount or time.
Planning a bigger move?
Apply early so financing moves on your lease or closing timeline.
Updated September 14, 2026 · MedicalBizFunding Team