Down Payment

The down payment is often the single biggest barrier for a healthcare practice considering ownership. Its size is set by the loan's loan-to-value ratio: a conventional commercial loan at 75–80% LTV requires 20–25% down, while an SBA 504 loan can lower it to about 10%. On a $2,000,000 building, that is the difference between roughly $400,000 and $200,000 — capital that could otherwise fund equipment, hiring, or a second location. The down payment is calculated on the lower of purchase price or appraised value, so a low appraisal can unexpectedly increase the cash required at closing. Beyond the down payment itself, buyers should budget for closing costs, due diligence expenses, and reserves. Weighing the down payment against alternative uses of that capital is a central part of the owner-occupied decision.

The down payment determines how much of a practice's capital is locked into real estate rather than kept available for the business. Choosing the right loan program can cut that requirement dramatically.

A practice purchasing a $1,800,000 building with a conventional loan at 80% LTV needs a $360,000 down payment. Financed instead through an SBA 504 loan at 90%, the down payment falls to roughly $180,000.