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SBA Loans for Professional Practices

Posted by Brenda Gibson on Wednesday, April 24, 2019

If you own a professional practice an SBA loan is an excellent way to gain the financial support you need. Learn how SBA loans work and the benefits they provide to small business owners.

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If you are starting a professional practice or buying into one, you have probably spent some time thinking about how you are going to obtain financing. Some professional practices, like medical and dental practices, can have a hard time qualifying for a traditional bank loan. This is because professional practices have a lot of “blue sky,” or not enough collateral.

The good news is, if you own a professional practice, a small business loan guaranteed through the Small Business Administration (SBA) is an excellent way to gain the financial support you need.

How SBA loans work

The SBA works with banks and other lenders to guarantee up to 75% of loans they issue. The guarantee banks receive from the SBA lowers the bank’s risk and allows them to approve loan requests they would otherwise have to turn down. This is a big advantage if your professional practice doesn’t qualify for a traditional bank loan.

Benefits of SBA loans

There are a two distinct advantages of SBA small business loans that make them an ideal lending option for a professional practice.

  1. Collateral and equity are not required. Collateral is tangible; it is something you can touch. Items commonly used for collateral include equipment, office furniture, computers and building space. And equity is related to what a business is worth.

    If you are just starting your professional practice, there is a good chance you don’t meet these requirements and wouldn’t be able to put a lot of money down initially for the loan. Under these circumstances, it is difficult for a bank to approve a loan request without an SBA loan guarantee.
  2. Longer repayment terms. SBA loans offer longer repayment terms and higher borrowing limits. For example, with a real estate loan through the SBA, an owner of a professional practice can get up to 25 years for repayment. Having a longer repayment term is critical for cash flow and a huge benefit for a new professional practice that doesn’t have a lot of equity built up.

Types of SBA Loans

Loans guaranteed by the SBA can range from $500 to $5 million and can be used for most business purposes. SBA small business loans can be utilized for owner-occupied real estate purchases and expansions, equipment purchases, operating lines of credit, construction, working capital, and business acquisitions. If you are not sure what type of SBA loan best fits your needs, reach out to an SBA approved lender, and they can match the right loan for your business needs.

Who is eligible for an SBA loan?

There are a number of factors used to determine if a business is eligible to receive an SBA loan. A few of the main items taken into consideration are:

  • Borrower’s character and experience in the industry
  • If the business is located in the United States
  • If the business meets the SBA’s size requirements
  • Business must demonstrate the need for the requested loan and the lender must provide written confirmation that the business can’t obtain financing without an SBA guarantee.

Related content – What you need to know before applying for a small business loan

If you own a professional practice and are interested in learning more about SBA loans, reach out to one of our authorized SBA loan lenders to find out what your options are.

Small Business Financing for the Next Step

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The Author

Brenda Gibson

Brenda Gibson

Commercial Banker, SVP

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