Most people who come to us about buying a medical practice think it works like buying any other business. Run the SDE, apply for an SBA loan, close in 90 days.

That is not how it works. Not even close.

A medical practice for sale sits at the intersection of healthcare regulation, professional licensing, and standard deal finance. Get any one of those wrong and the deal falls apart. Sometimes after six figures in diligence costs. Here is what you actually need to know before you put an offer on paper.

Why Medical Practices Are Different from Other Acquisitions

The core issue is licensure. In most states, a medical practice can only be legally owned by a licensed physician or a physician-managed professional corporation (PC) or professional limited liability company (PLLC). This is called the corporate practice of medicine (CPOM) doctrine, and it exists in roughly 30 states.

That one rule eliminates most non-physician buyers from direct ownership.

But it does not eliminate SBA financing or third-party management. What you see more often is a structure where a Management Services Organization (MSO) holds the business assets and contracts with the PC for administrative services. The physician owns the clinical entity, and a non-physician investor can own the MSO. It is legal, it is common, and it requires an attorney who knows healthcare transactions.

If you are a physician looking at a medical practice for sale, you have a cleaner path. If you are not a physician, the structure gets more complex. It is not a dead end, though. It just requires the right legal scaffolding from day one.

What Drives Valuation in Medical Practices

Medical practices are typically valued on a multiple of EBITDA or SDE. The specific multiple depends on specialty, payer mix, patient concentration, and whether the selling physician is staying on post-close.

Here is how the numbers tend to play out.

Primary care practices often trade at 0.5x to 1.0x revenue or 2x to 4x EBITDA. Specialty practices with stronger margins (dermatology, ophthalmology, aesthetics) can trade at 4x to 7x EBITDA or higher. Practices with recurring revenue, like membership models or subscription-based concierge care, command premium multiples.

But the single largest valuation variable is physician dependency.

If 80% of the revenue walks out the door the day the selling physician retires, that is a concentration risk problem. Lenders see it. Acquirers see it. And it will either tank the price or force a long transition agreement as part of the deal structure.

A two-year employment agreement with the seller, with a performance-tied earnout, is common on physician-heavy practices. Your attorney should draft that carefully. The seller needs a financial incentive to stay engaged. Without that incentive, you are buying a patient relationship that may not transfer. We have seen this play out enough times to know: the transition agreement is not a nice-to-have. It is load-bearing.

How SBA 7(a) Financing Works for Medical Practice Acquisitions

SBA 7(a) is absolutely available for medical practice acquisitions, including dental practices, optometry practices, and specialty clinics. The same fundamentals apply: 10% minimum equity injection, loans up to $5M, 10-year term for business acquisitions (per SBA SOP 50 10, which governs 7(a) lending).

The debt service coverage ratio (DSCR) target we use is 2x. The floor is 1.5x, and only if synergies are clearly documented. Below that, the deal is fragile.

Say you are looking at a primary care practice asking $1.8M. The practice generates $320K in SDE after normalizing for the seller’s compensation. At $1.8M, your annual debt service on an SBA 7(a) loan is somewhere around $215K to $230K. That DSCR comes in at roughly 1.4x.

That is thin. A lender may pass, or require additional collateral.

If you negotiate that price down to $1.4M, or identify $80K in legitimate add-backs during diligence, the deal becomes bankable. The math is the math.

SBA lenders will also look hard at payer mix. A practice with 60% Medicare and Medicaid faces reimbursement risk that a commercial-heavy practice does not. That affects underwriting, sometimes dramatically. CMS reimbursement schedules can shift year to year, and a practice that is already running tight margins on government payers is one rate adjustment away from a DSCR problem.

The Seller Note Structure That Actually Gets Deals Done

On medical practice acquisitions, seller notes are not just helpful. They are often essential.

We consistently achieve a 10-year full standby, 0% interest seller note structure on more than 90% of our deals. Zero interest. Zero payments. For 10 years. For a medical practice, this matters more than most acquisitions because of the transition risk baked into every physician-dependent practice.

A seller who accepts a 10% to 20% seller note has skin in the game during the post-close period. They are motivated to make warm introductions to patients, train your replacement clinician, and protect referral relationships. A seller who takes 100% cash at close walks out the door with no financial incentive to help you keep what you just paid for.

When you are looking at a medical practice for sale, ask how the seller plans to handle the transition. Their answer tells you more about deal risk than their financial statements do.

Due Diligence Items Specific to Medical Practices

Standard business diligence applies: three years of tax returns, P&Ls, accounts receivable aging, lease review. But medical practices carry a second layer of diligence that most acquisition advisors are not prepared for.

Here is what has to get examined:

Credentialing and payer contracts. Every insurance contract the practice holds is typically non-transferable. A new owner re-credentialing with Medicare alone can take 90 to 120 days per CMS processing timelines. During that window, you cannot bill Medicare. That is a cash flow gap that needs to be modeled and sometimes funded through working capital in the deal.

Compliance history. HIPAA violations, billing audits, and OIG exclusions can follow a practice. A healthcare compliance attorney should run exclusion checks on all key personnel and review the last two years of billing records. This is not optional diligence. It is protective diligence.

Malpractice tail coverage. When the selling physician leaves, their claims-made malpractice policy ends. Tail coverage insures against claims filed after the policy period for acts that occurred during coverage. This is often a five-figure cost that needs to be assigned in the asset purchase agreement.

Staff and employment agreements. Key clinical staff, especially nurse practitioners or physician assistants who drive revenue independently, are assets. If they have no employment agreements and are not party to the sale, they can leave the week after close. Three years of tax returns. Minimum. But also: contracts with every revenue-generating clinician.

Certificate of need (CON) laws. In roughly 35 states, certain healthcare facilities and equipment require state approval before acquisition or expansion. CON laws are state-specific and can materially affect what you can do with the practice post-close.

Side note: this is also why proof of cash matters so much at this stage. If the bank deposits do not reconcile to the tax returns and the reported collections, none of the financial analysis holds up. Billing and collections data in a medical practice can tell a very different story than the P&L, depending on how aggressively the seller books revenue versus what actually gets collected from payers.

Get your healthcare M&A attorney involved before the LOI, not after.

All of that covers the financial and regulatory layers. Now for the part that determines whether the deal actually works after you close.

Negotiating the Transition Agreement

This is where most medical practice deals succeed or fail in the first 12 months.

The selling physician should be contractually tied to the practice for a defined transition period, typically 6 to 24 months depending on the size and complexity of the patient panel. That agreement should specify minimum hours per week, patient introduction requirements, and clear language on non-solicitation.

The earnout structure should reward the seller for patient retention, not just showing up. If the practice retains 85% of active patients through month 12, the seller earns X. If retention drops below 70%, the earnout is reduced. Structure matters more than price on these deals, and the transition agreement is where that principle shows up most clearly.

Your lender will want to see this structure. It de-risks the transition on paper and in practice.

Where to Find Medical Practices for Sale

Most medical practice listings move through healthcare-specific business brokers, not general business marketplaces like BizBuySell. Some specialty practices are sold off-market entirely through physician networks and professional associations.

Sources worth monitoring: healthcare business broker networks (several operate regionally by specialty), state medical society publications, private equity-backed consolidator outreach (they often sell off smaller clinics that do not fit their platform), and direct outreach to retiring physicians in your target specialty and geography.

We source deals both on and off market. On-market listed practices give you structured information, broker-facilitated introductions, and a clearer timeline. Off-market opportunities through specialty-specific physician networks can sometimes (not always) offer more flexibility on terms and less buyer competition, but they require more upfront work and the information quality varies. Neither channel is inherently better. The right channel depends on the specialty, the geography, and what the seller actually wants.

If you have spent any real time looking at deals in healthcare, you have seen how much variation there is from one practice to the next. The sourcing strategy should match the target.

Frequently Asked Questions

Can a non-physician buy a medical practice with an SBA loan?

In most states, a non-physician cannot directly own a clinical medical practice due to corporate practice of medicine laws. However, a non-physician can own a Management Services Organization (MSO) that holds the practice’s business assets and contracts with a physician-owned entity for clinical services. SBA financing can be structured around this, but it requires a healthcare attorney experienced in MSO structures.

What is the average multiple for a medical practice for sale?

Multiples vary significantly by specialty. Primary care practices often sell at 2x to 4x EBITDA. Higher-margin specialties like dermatology, aesthetics, or ophthalmology can reach 5x to 7x EBITDA or more. The single largest driver of multiple is physician dependency: the more revenue depends on the seller personally, the lower the supportable multiple.

How long does it take to close a medical practice acquisition?

Most medical practice acquisitions take 90 to 150 days from signed LOI to close. Healthcare-specific diligence items like credentialing verification, compliance review, and payer contract analysis add time relative to a standard business acquisition. Budget more time, not less. Do not let a seller pressure you to rush diligence on a healthcare transaction.

Does SBA financing cover the full acquisition price of a medical practice?

SBA 7(a) loans cover up to 90% of the acquisition price, with a 10% minimum equity injection required from the buyer. The SBA maximum loan amount is $5M. For practices priced above $5M, you would need a combination of SBA financing, seller notes, and potentially additional equity. Your DSCR needs to support the full debt load at close.

What happens to payer contracts when a medical practice changes ownership?

Insurance contracts, including Medicare and Medicaid enrollment, are generally not transferable to a new owner. The acquiring physician or entity typically must re-credential independently. Medicare re-credentialing alone can take 90 to 120 days, creating a billing gap during transition. Working capital reserves to cover this period should be built into the deal structure and, where possible, financed as part of the SBA loan’s working capital component.

Ready to Evaluate a Medical Practice Acquisition?

Medical practice acquisitions are not for buyers who want to move fast and figure out the details later. The regulatory layer, the transition risk, and the financing complexity all require a team that has done this before.

Regalis Capital runs a done-for-you acquisition advisory service. We find deals, build the financial models, structure the seller notes, coordinate with SBA lenders, and manage the process through close. That includes healthcare transactions where the structural and regulatory considerations go well beyond standard deal work.

If you are serious about acquiring a medical practice and want experienced advisors running the process, start here.