Financing a Practice Merger or Second Location

Strategic Growth Through Acquisition

Once you've established a successful practice, growth through acquisition becomes an attractive option. Acquiring a second location or merging with another practice can rapidly expand your patient base, add talented providers, capture market share, and create operational efficiencies.

The current market presents significant opportunities—retiring practitioners, consolidation trends, and favorable financing conditions make practice acquisitions more accessible than ever.

Merger vs. Acquisition: Understanding the Difference

While often used interchangeably, mergers and acquisitions have distinct structures:

Evaluating Acquisition Opportunities

Not every practice for sale is a good acquisition target. Evaluate potential acquisitions based on strategic fit (location, services, patient demographics), financial performance (revenue, profitability, trends), operational compatibility (systems, culture, staff), and transition risk (provider dependency, patient retention likelihood).

The best acquisitions strengthen your existing practice while bringing complementary capabilities or market access.

Financing Multi-Practice Operations

Financing your second (or third) location differs from first-practice acquisition because you have track record to leverage, existing cash flow to support debt, operational expertise to demonstrate, and possibly collateral in your current practice.

Lenders view experienced practice owners as lower risk, often resulting in better terms than first-time buyers receive.

SBA 7(a) Loans for Practice Acquisition

SBA 7(a) loans remain the most common financing vehicle for healthcare practice acquisitions. Benefits include financing up to $5 million, 10-year terms for practice acquisition, 25-year terms for included real estate, and down payments as low as 10%.

For larger acquisitions or those including real estate, SBA 504 loans may offer even better terms on the real estate portion.

Conventional Healthcare Practice Loans

Healthcare-focused banks offer conventional practice acquisition loans with competitive features: faster closing than SBA (30-45 days typical), up to 100% financing for qualified buyers, flexible terms tailored to your situation, and streamlined process with experienced lenders.

These loans work particularly well when speed matters or when SBA requirements don't fit your situation.

Structuring the Deal

Most healthcare practice acquisitions involve multiple financing components:

• Senior debt: Bank or SBA loan (60-80% of purchase price)
• Seller financing: Common (10-30%), demonstrates seller confidence
• Buyer equity: Cash, rolled equity, or earnout structures
• Working capital: Often included in financing for transition period

Integration Planning

Successful acquisitions require careful integration planning. Key considerations include practice management systems (consolidate or run separately?), branding (unified brand or maintain acquired name?), staffing (retention, role changes, compensation alignment), scheduling (coordinate patient flow between locations), and financial reporting (consolidated or separate P&Ls).

Start integration planning before closing. The transition period is critical for patient and staff retention.

Managing Multiple Locations

Operating multiple locations introduces management complexity. Consider your presence requirements (how will you split time?), delegation needs (who manages each location day-to-day?), communication systems (how do locations coordinate?), and quality control (how do you maintain standards across sites?).

Many practice owners find that successful expansion requires stepping back from clinical work to focus on management—a transition that requires planning.

Financial Projections

Lenders will want to see how the combined operation will perform. Prepare projections showing combined revenue potential, consolidated expenses and overhead efficiencies, debt service coverage from combined cash flow, and synergies and growth opportunities.

Be realistic—lenders discount overly optimistic projections. Demonstrating thoughtful, conservative planning builds credibility.

Due Diligence for Second Acquisitions

Even experienced practice owners should conduct thorough due diligence. Verify financial statements against tax returns, analyze patient retention risk, evaluate staff quality and compensation, assess equipment and facility condition, and review all contracts and legal matters.

Your experience from running a practice helps you identify issues, but don't let familiarity lead to shortcuts.

Building a Practice Group

For some owners, a second location is the beginning of a larger vision—building a practice group with multiple locations, providers, and eventually, equity value beyond a single practice.

If this is your goal, consider establishing scalable systems from the start, building management infrastructure, creating partnership or equity structures for key providers, and developing brand identity across locations.

The financing and operational decisions you make now shape your long-term growth trajectory.