SBA Loans Are a Great Resource for Growing Your Medical Practice

Whether they are just starting a practice, expanding a practice or in need of additional working capital to run a practice, many physicians and practice managers are utilizing credit to grow their businesses.

There are many options on how to structure financing, but one that has grown more popular for medical practices in recent years is the use of Small Business Administration (SBA) loans.

The SBA is a government agency that provides support to small businesses through many channels, such as education, disaster-relief assistance and its most visible element: SBA loan programs. The SBA does not directly offer loans, but guarantees against default certain portions of the loans made by banks and other lenders that follow SBA guidelines. These loans assist businesses that may not be able to acquire financing under traditional terms.

How Can SBA Loans Help 
Your Medical Practice?

The SBA loan program options are attractive to medical practices and other small businesses because the collateral requirements, interest rates and equity injection requirements are typically lower than the rates applied to standard commercial loans. SBA loans also tend to cover certain fees and have longer amortization periods for lower payments, which help your practice to preserve its capital.

The two most popular types of SBA loans are those made via the 504 and 7(a) programs, both of which can be used by medical practices. The 504 loans are intended to be used to improve the community and economy. These loans may be used to purchase real estate, finance construction or purchase equipment with the goal of helping the business to create jobs. Because these loans are applied to the treasury market, interest rates are typically fixed. Loan amounts are typically capped at $5 million.

The financing provided by 7(a) loans can be applied to the same purposes as those covered by 504 loans. However, 7(a) loans may also be used for working capital, to open lines of credit and, in some situations, for refinancing. These loans are tied to the prime rate, so interest rates tend to be variable. Loan amounts are typically capped at $1 million.

Both the 7(a) and 504 loans have their own advantages. For example, 7(a) loans offer more flexibility, and 504 loans can be issued in higher amounts. The right choice for your practice will depend on several factors, such as how you intend to use the loan, how much collateral you have and more. Depending on the type of SBA loan that you select, SBA financing can help you with:

  • Starting a practice
  • Working capital
  • Purchasing new equipment
  • Purchasing real estate
  • Acquiring another practice
  • New construction or building improvements
  • Purchasing supplies and inventory
  • Refinancing

Does Your Practice Qualify 
for an SBA Loan?

The SBA does have some strict requirements that must be met in order to qualify for a loan. Qualifying businesses typically have fewer than 500 employees and generate less than $20 million in annual revenue. They must also be independently owned and operated. Specific requirements will vary by industry, the type of loan and the project the loan will facilitate. Loan terms, including the amount of the loan and the interest rate, will also vary.

Remember, applying for a loan is a complex process. To determine if your practice meets the SBA eligibility requirements and the appropriate financing options for your practice, you should consult with your banker.

Howard H. Lutz is Senior Vice President, Private Banking Manager for Amegy Bank San Antonio. He leads a team of professionals who work extensively with physicians and hand in hand with bankers from all lines of business, enabling clients to receive one-on-one, personalized solutions and comprehensive service at any time.

The Private Banking team specializes in meeting and anticipating the needs of doctors, corporate executives, professionals, entrepreneurs, business owners, wealthy individuals and families who expect and deserve excellence and seek personalized relationship banking.

For more information, Lutz can be reached at (210) 343‑4555 or

MD News November 2011, San Antonio


2 comments for “SBA Loans Are a Great Resource for Growing Your Medical Practice”

  1. Gravatar of Chris HurnChris Hurn
    Posted Wednesday, January 11, 2012 at 12:47:18 PM

    While I applaud Mr. Lutz for writing his article, I'm afraid there are a few factual errors that need corrected. I don't necessarily fault Mr. Lutz for these as sometimes articles get edited down and lose some context, but several of his points appear dated (in other words, SBA standards have been changed in recent years). Below are my suggested edits:

    1. SBA 504 loans do NOT have a cap of $5 million. The second lien position in an SBA 504 structure is typically capped at $5 million, which means total projects of up to around $12 million are quite possible.. My firm, for instance, closed fifteen SBA 504 loans in 2011 for amounts LARGER than the stated "cap" in the article above.

    2. SBA 7(a) loans do NOT have a cap of $2 million -- their cap is $5 million.

    3. SBA 504 loans can now be used to refinance conventionally-financed commercial mortgage debt (previously, this was only possible with 7(a) loans).

    4. The SBA NO LONGER adheres to the size standards that Mr. Lutz mentioned.

    If you are interested in learning more current information, I'd encourage you to visit one of my websites: Thank you.

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