This article from Canyonmoor Lending Group in Montrose, Colorado explains how physician and medical practice loans are structured: term loans for practice purchases and partner buy-ins, equipment financing, lines of credit for claim delays and working capital. It covers how a practice is valued, with invented worked figures for a purchase, a buy-in and an equipment loan.
How Physician Practice Loans Are Structured: The Direct Answer
A purchase or buy-in is a term loan: a fixed amount repaid in equal installments from the practice's collections, sometimes with a seller note beside it. Equipment is financed on its own, secured by the equipment. The wait between visits and insurer payments is carried by a line of credit, and a single gap, such as opening a second site, by working capital. Each structure has its own term and security, so a practice can hold several at once.
Healthcare Practice Loans in Montrose County, CO: The Figures
Health care and social assistance had the largest payroll of any sector in Montrose County, CO in 2023, $155.5 million, and the most employees, 2,905 (County Business Patterns 2023). Offices of physicians counted 33 employer establishments with 324 employees; offices of other health practitioners counted 45. Nonemployer Statistics counted 35 physicians' offices without paid employees for 2024 (Nonemployer Statistics 2024).
The medical practice page covers claim delays, equipment and acquisitions in more depth.
How to Value a Physician Practice Before Buying It
A small practice is valued largely on what it earns for its owner: collections, minus operating costs, with the owner's own pay added back. That figure is multiplied by a factor a buyer and seller agree on, which depends on the payer mix, how the patients are referred, whether the selling physician stays through a transition, and the condition of the equipment. A formal valuation by a firm that values practices gives both sides a figure to negotiate from.
- Three years of collections, by payer.
- Operating costs, with the owner's compensation shown separately.
- Active patient count and referral sources.
- Equipment list with ages, and the lease terms.
- Each payer contract, and whether it can pass to the buyer.
How to Value a Medical Practice for Sale, Worked With Invented Figures
Illustration only, invented figures: a practice earns $260,000 a year for its owner before the owner's pay, and buyer and seller agree on a factor of 1.1, a price of $286,000 (our arithmetic). The buyer puts $28,600 down and finances $257,400 over 120 months at an invented annual rate of 9%, about $3,261 a month (our arithmetic). The buyer's own pay must come from what is left after that payment.
A seller who stays on for a transition period, or carries part of the price as a note, changes how much the term loan has to carry, and partners read the transition agreement closely.
Physician Buy-In Loans for Doctors Joining a Group
Illustration only, invented figures: a group values itself at $600,000, and a new physician buys a 25% share for $150,000. Spread over 84 months at an invented 9.5% a year, that works out to about $2,452 monthly (our arithmetic). The loan is the physician's, repaid from the share of profits the buy-in brings, and a partner reads the group's agreement on how profits are split.
Read the buy-in agreement before financing it: what the share includes, how it is valued if the physician leaves, and whether the group guarantees any of the loan.
Medical Equipment Financing Beside a Practice Loan
Illustration only, invented figures: a $65,000 ultrasound unit financed over 60 months at an invented annual rate of 10% costs about $1,381 a month (our arithmetic), secured by the unit. Keeping equipment on its own loan, separate from the purchase loan, ties each payment to an asset and lets the equipment term match its working life. The equipment page compares leases and loans for clinical gear.
Seller Notes and Earn-Outs Beside the Practice Loan
A seller who carries part of the price as a note is paid over time from the practice's earnings, after or alongside the bank loan. An earn-out ties part of the price to collections after the sale, so the seller shares the risk that patients leave. Both lower the amount the term loan must carry, and both add a second payment the practice must cover. A partner reads the note's terms and whether it is subordinated to the loan.
Lines of Credit and Working Capital for Claim Delays
Insurers pay weeks after a visit. A line sized to the usual claim wait carries payroll through it and is paid down as claims clear. A new owner taking over a practice can face a longer gap, while payer contracts are reassigned, which a working capital loan sized to the transition covers once.
- Pull an aging report by payer from the practice software.
- Measure the average days from visit to payment.
- Multiply monthly collections by that wait to size the gap.
- Phone (970) 238-5206 or send the web form with the figure.
By Canyonmoor Lending Group · Updated
