Medical Office Feasibility Study in Michigan

Michigan physician loans are smaller than the class

The median SBA loan to a Michigan physician practice is $250,000, 0.73x the national median for medical offices, and our screen marks it apart, by the margin and beyond sampling noise, from both Michigan lending across every class and physician lending nationally. The central half of Michigan practice loans spans $100,000 to $582,500, which points to equipment, working capital and practice purchases more than buildings. Michigan ranks 8 of 53 among states with 239 loans and $116.7 million from FY2017 to FY2026; the class places 11 of 39 among Michigan classes, and at 0.82x the location quotient sits a little below the national share.

The Huntington and the Detroit suburbs

The Huntington National Bank holds 98 of the 214 7(a) loans, worth $36.2 million, far ahead of JPMorgan Chase Bank, National Association with 14 for $7.8 million, Fifth Third Bank with 13 for $2.9 million, ChoiceOne Bank with 12 for $6.0 million and Bank of America, National Association, whose 6 loans total $4.3 million. Of the 25 SBA 504 loans, Michigan Certified Development Corporation holds 14 for $11.0 million while Great Lakes Commercial Finance has 8 worth $7.9 million. Franchises barely register, at 0.84%. Oakland County leads with 61 loans, Wayne follows with 40 and Macomb with 28, ahead of Kent at 18 and Genesee at 17.

Cancellation is the larger risk in this cell: Michigan practice approvals of FY2017 to FY2024 show cancellations of no less than 15.9%, and 16.9% with undisbursed loans included. Of the 108 Michigan practice loans funded across FY2017 to FY2021, 3.7% are charged off, and every one of those losses came within five years, at 3.7% too. Both are floors. Lending has firmed, from 14 loans in FY2019 to 34 for $16.9 million in FY2021 and 26 for $22.6 million in FY2024.

What a Michigan practice study must test

Because many approvals in this cell fall away, a Michigan practice study should resolve the deal's weak points before the commitment: the price of a practice against its collections, physician retention or recruitment, and the lease. Demand means population per physician in the specialty, referral sources and payer mix in Oakland, Wayne, Macomb or wherever the practice sits. Cost covers equipment, build-out and the working capital that carries the practice until reimbursements arrive. Debt service coverage should rest on collections, not charges, after staff and the owner's compensation, and since every recorded loss came early, the first years deserve the closest test. If the Michigan deal includes an office building, its value should come from comparable medical office sales.