Loan-to-Value (LTV)

Lenders use LTV to measure risk: the higher the LTV, the more of the purchase they are financing and the more exposed they are if the borrower defaults. For owner-occupied medical and dental real estate, conventional commercial loans typically cap LTV around 75–80%, meaning the practice must fund the remaining 20–25% as a down payment. Government-backed programs change this equation significantly — an SBA 504 loan can push effective financing to 90% LTV, freeing up capital a practice would otherwise tie up in the building. LTV is calculated on the lower of appraised value or purchase price, which is why a property that appraises below the agreed price can force the buyer to bring more cash to closing. LTV also interacts with the property's income: lenders look at both LTV and debt service coverage before approving a loan.

LTV directly determines how much capital a practice must lock into real estate versus keeping available for equipment, staffing, or expansion. A lower down payment requirement can be the difference between buying and continuing to lease.

A dental practice buys a building for $2,000,000. At 80% LTV, the lender finances $1,600,000 and the practice provides a $400,000 down payment. Using an SBA 504 structure at 90%, the required down payment could drop to roughly $200,000.