Medical Practice Acquisition Loans: Buying an Existing Clinic

You spent four years in med school, another three to seven in residency, and probably a fellowship on top of that. You know how to diagnose a rare arrhythmia or set a compound fracture in your sleep.

But nobody taught you how to buy a business.

And that’s exactly what a private practice is – a business. A complex, regulated, high-stakes business.

For many doctors, dentists, and veterinarians, the dream isn’t just to practice medicine; it’s to call the shots. But starting a clinic from scratch? That is a grind. You’re looking at months of zero revenue, fighting for insurance credentialing, and praying the phone rings. It’s the “ramen noodle phase” of entrepreneurship, and honestly, you’re probably too far into your career for that.

That’s why buying an existing medical practice is often the smarter play. You walk in on Day One with a full patient roster, a trained staff, and – most importantly – immediate cash flow.

But here’s the snag: Good practices aren’t cheap. You are buying years of someone else’s hard work, their reputation, and their patient charts. Unless you have a few million sitting in a checking account (and after student loans, who does?), you need financing.

At Eboost Partners, we help healthcare providers navigate this transition. Whether you need $5K or $2M, we understand that in medicine, time is literal money. Let’s break down how you can secure the capital to take over the keys without drowning in debt.

What Is a Medical Practice Acquisition Loan?

Let’s strip the jargon. A medical practice acquisition loan is financing specifically designed to purchase the assets (and sometimes the liabilities) of an operating healthcare business.

It’s different from a mortgage. When you buy a house, the bank appraises the bricks and sticks. If you don’t pay, they take the house.

When you buy a dermatology clinic, the “bricks” might just be a leased office in a strip mall. The real value is the 5,000 active patient charts and the recurring revenue from insurance claims. Traditional banks struggle with this because they can’t “repossess” a relationship with a patient.

That’s why you need Medical Acquisition Loans. These are cash-flow-based loans. The lender is betting that the practice will continue to generate enough profit to pay back the loan and pay you a salary.

Why Buy an Existing Medical Practice Instead of Starting New?

I see this debate all the time. “Jordan, why should I pay a premium for someone else’s clinic when I can build my own for half the price?”

Here’s the thing: Risk.

Starting from scratch is a gamble. You are guessing that patients will come. When you buy an existing practice, you aren’t guessing. The patients are already there.

1. Immediate Cash Flow: You generate revenue the moment you unlock the door. This makes getting approved for a loan much easier because the “proof of concept” is already in the bank statements.
2. Trained Staff: Hiring a competent office manager or billing specialist is a nightmare. Acquiring a team that already knows how to use the EHR (Electronic Health Records) system is worth its weight in gold.
3. Credentialing: Getting credentialed with insurance payers can take 6 months. An existing practice often allows you to step into existing contracts (though this varies by state and payer).

What Costs Are Included in a Clinic Acquisition?

The asking price is just the tip of the iceberg. When you are structuring your financing, you need to account for the whole picture, or you’ll run out of cash in the first month.

Purchase Price Components

• Tangible Assets: Medical equipment financing covers assets like X-ray machines and dental chairs, as well as furniture and inventory.
• Intangible Assets (Goodwill): This is usually 60-80% of the price. It’s the value of the patient records, the brand name, and the non-compete agreement with the seller.
• Real Estate: Sometimes the doctor owns the building. If so, you are buying a business and a commercial property.

Additional Acquisition Costs

• Working Capital: You need cash to make payroll while you wait for the insurance reimbursements to transfer to your name. This “collection lag” is common, which is why loans for delayed insurance reimbursements are often part of the acquisition strategy.
• Tail Insurance: Buying coverage for malpractice claims that might arise from the previous doctor’s work.
• Legal & Valuation Fees: You need a specialized healthcare attorney and a CPA to audit the books. Don’t skimp here.

Medical Practice Acquisition Financing Options

You have a few levers to pull. The “best” loan depends on how fast you need to close and how strong the practice’s financials are.

SBA 7(a) Acquisition Loans

The Small Business Administration (SBA) loves doctors. Historically, medical practices have very low default rates.

• The Pros: Long terms (10 years), low down payments (often just 10%), and competitive interest rates.
• The Cons: It’s a bureaucracy. The paperwork is mountainous, and closing can take 3 to 6 months. If the seller is in a rush, this might kill the deal.
• Resource: Learn more about SBA loans and the timeline involved.

Conventional Bank Loans

Big banks often have “Physician Loan” divisions.

• The Pros: Slightly faster than SBA and fewer fees.
• The Cons: They are stricter. They often want a higher down payment (20%+) and perfect credit. They might shy away from practices with too much “Blue Sky” value.

Healthcare-Specific Lenders (Alternative Financing)

This is where Eboost Partners fits in. Sometimes, you don’t need a 10-year marriage with a bank; you need speed and flexibility.

• The Pros: We can fund up to $2M in as little as a few days. We look at the practice’s cash flow, not just your tax returns.
• Use Case: Often used for partner buy-ins (buying out a retiring senior partner) or for the working capital needed to bridge the insurance gap.
• Structure: Terms up to 24 months with automatic payments. This allows you to pay down debt aggressively.

Seller Financing

Often, the selling doctor will agree to finance part of the deal (e.g., 20%).

• Why do it? It signals confidence. If the seller is willing to wait to get paid, they believe the patients will stick around. It also lowers the amount you need to borrow from a lender.

Private Equity or Partner Buy-Ins

You might not be buying the whole practice. Maybe you are buying 20% equity to become a partner. Large institutional lenders hate these small deals. We love them. A $200,000 loan to buy your buy-in stake is a perfect fit for alternative financing.

Acquisition Loans With Fair or Limited Credit

“I have $300,000 in student loans and my credit took a hit during residency. Can I still buy a practice?”

Yes.

In the medical world, cash flow trumps FICO.

Lenders know that doctors are high earners but often have “messy” balance sheets early in their careers. When we evaluate a deal at Eboost, we look primarily at the target practice.

• Has the practice been profitable for 3 years?
• Is the revenue consistent?
• Is the patient base diverse (not reliant on just one referral source)?

If the practice is healthy, it can support the loan payments, even if your personal credit score is in the 600s. We specialize in business loans for bad credit situations where the underlying business fundamentals are strong.

How Lenders Evaluate a Medical Practice Acquisition

When I look at an acquisition file, I’m putting on my detective hat. I’m looking for red flags that might mean the patients will vanish once the old doctor leaves.

1. Payer Mix Where does the money come from?

• Good: A mix of private insurance, Medicare, and cash pay.
• Risky: 90% Medicaid reliance (low margins, high regulation risk).

1. Provider Production Is the selling doctor a “superman”? If the seller is generating $2M a year working 6 days a week, and you plan to work 4 days a week, the revenue is going to crash. We need to see that the production is replicable.
2. Staff Retention Does the Office Manager plan to stay? In many clinics, the Office Manager effectively “owns” the patient relationship. Losing them is a disaster.

How Much Can You Borrow to Buy a Clinic?

At Eboost, our lending limits go up to $2M. Typically, lenders will finance 70% to 100% of the purchase price, depending on the cash flow.

The Golden Ratio: Debt Service Coverage Ratio (DSCR). We want to see that the practice’s net income is at least 1.25x the annual loan payments.

• Example: If the loan payments are $100,000 a year, the practice needs to generate $125,000 in profit (after paying you a fair salary).

Acquisition Timeline: From Offer to Funding

1. Letter of Intent (LOI): You and the seller agree on a price.
2. Due Diligence (30-60 Days): You audit their charts, financials, and contracts.
3. Financing Application: You send us the LOI and the practice’s financials (P&L, Tax Returns).
4. Underwriting: We stress-test the numbers.
5. Funding: For alternative loans, this is fast (days). For SBA, expect months.
6. Closing: Money wires, keys exchange, and you are officially the boss.

If you are stuck in the “waiting” phase with a bank and risk losing the deal, consider applying for a bridge loan via our application page.

Common Mistakes Buyers Make

I don’t want you to learn these the hard way.

1. Ignoring “Cultural” Fit If you are a high-tech, aggressive surgeon buying a laid-back, holistic practice, the patients will revolt. You can’t finance a personality mismatch.
2. Underestimating Working Capital You buy the practice on Friday. On Monday, you have to pay the receptionist. But the insurance checks for the work you do on Monday won’t arrive for 45 days. You need a cash cushion.
3. Not Valuing Equipment Correctly Is that ultrasound machine leased or owned? If it’s leased, you might be taking on a monthly payment you didn’t expect. Always check the UCC filings.

How to Improve Approval Odds

Want to sail through underwriting?

• Get a Valuation: Don’t just trust the seller’s asking price. Hire a third party to value the practice.
• Clean Up the Seller’s Books: Often, private doctors run personal expenses through the business (cars, country clubs). Work with a CPA to “add back” these expenses to show the true profit (EBITDA).
• Have a Transition Plan: Show us a written agreement where the seller stays on for 3-6 months to introduce you to patients. This reduces patient attrition risk significantly.

Pros & Cons of Buying an Existing Clinic

Pros

• Instant Revenue: No starvation period.
• Proven Systems: The phone lines, billing software, and waiting room magazines are already there.
• Easier Financing: Banks prefer funding history over projections.

Cons

• Legacy Issues: You inherit the old doctor’s reputation (good or bad) and potentially their bad habits.
• Cost: You are paying for Goodwill, which is expensive air.
• Staff Friction: The existing staff might say, “That’s not how Dr. Smith did it.”

Who Should Consider a Medical Practice Acquisition Loan?

• The Associate: You’ve been working at the clinic for 5 years, and the owner is ready to retire. You know the patients, you know the skeletons in the closet.
• The Expansionist: You own one dental office and want to buy a second one in the next town over to share marketing costs. If you need specific dental practice financing, different rates may apply.
• The Private Equity Refugee: You are tired of corporate medicine and want to own your own destiny.

Buying a medical practice is probably the biggest financial decision of your life – bigger than your house, bigger than your student loans. But it’s also the path to autonomy.

You spent a decade learning how to be a doctor. Now, let us help you become an owner.

Whether you are looking to buy out a partner or acquire a thriving clinic across town, Eboost Partners has the capital and the speed to make it happen.