SBA 504 and 7(a) Loans Explained: Financing Options for Medical Office Buyers
As medical practices grow or launch anew, one major decision looms large: owning vs. leasing medical office space. For physicians and healthcare professionals in regions like the Conejo Valley and San Fernando Valley, the right financing solution can make ownership a strategic advantage. Among the most popular financing options for healthcare real estate are SBA 504 and SBA 7(a) loans.
Understanding the SBA Loan Landscape
The Small Business Administration (SBA) backs loans designed to stimulate small business growth by reducing borrowing costs and lowering risk to lenders. Two main loan programs SBA 504 and SBA 7(a) can serve different purposes depending on your practice goals.
SBA 504 Loan: Real Estate-Focused Financing
The SBA 504 loan is tailor-made for purchasing fixed assets, especially owner-occupied real estate, making it ideal for doctors looking to buy medical office space. It offers:
Up to 90% financing (only 10% down required)
Fixed interest rates
Long loan terms (typically 20–25 years)
Use of funds strictly for purchasing or improving real estate and equipment
This structure allows physicians to lock in long-term operational costs, build equity, and avoid rising lease rates. For practices in high-demand markets like the Conejo Valley, owning real estate can provide both stability and a competitive edge.
SBA 7(a) Loan: Versatility for Practice Growth
While the 504 loan is strictly for fixed assets, the SBA 7(a) loan is more flexible. Doctors and specialists can use these funds for:
Practice acquisition or buy-in
Working capital
Office renovations
Equipment purchases
Real estate (in some cases)
This versatility makes the 7(a) loan attractive for new practices or expanding clinics that require capital beyond just property purchases. In areas like the San Fernando Valley, where competition among private practices is fierce, this flexibility can be a game changer.
Lease vs. Own: What’s Right for Your Practice?
If you're weighing the decision between leasing and owning a medical office, consider the following:
Leasing offers flexibility, especially for new or growing practices unsure of long-term space needs.
Owning, particularly with SBA 504 financing, builds equity and can provide tax benefits.
Markets like San Fernando and Conejo Valley are seeing an increase in medical professionals choosing ownership to control costs and invest in long-term assets. In contrast, short-term practices or rapidly scaling operations may benefit more from leasing until growth stabilizes.
Real-World Application for Doctors and Dentists
Healthcare professionals often face unique financial hurdles high student debt, complex billing cycles, and equipment-intensive operations. SBA loans provide more accessible financing, helping doctors overcome these barriers with favorable terms, government guarantees, and support for business expansion.