Medical Office Feasibility Study in North Carolina

North Carolina physician loans: a lighter share, early losses

Physician practices carry less weight in North Carolina's SBA lending than nationally (location quotient 0.64x), placing 13 of 39 among North Carolina classes. The 108 approvals over FY2017 to FY2026, worth $65.8 million, rank the state 20 of 53, and the median of $308,400 is 0.90x the national class midpoint. No figure is flagged against North Carolina's lending overall or physician lending nationwide, and a cell of 108 loans is small.

Nearly all 7(a), spread among many banks

North Carolina practices used 7(a) for 105 loans and 504 for just 3, so owned clinic buildings financed through a certified development company are rare here. First-Citizens Bank & Trust Company holds 8 North Carolina loans, as does Wells Fargo Bank National Association; Newtek Bank, National Association holds 6, and Truist Bank and Live Oak Banking Company 5 apiece, those of Live Oak Banking Company totalling $6.5 million. The middle half of loans spans $125,000 to $737,800, and franchises account for 3.7%. Wake County leads with 16 loans, Mecklenburg has 13 and Union 10, then Pitt with 7. The series dipped to 4 loans in FY2021 and rose to 17 in FY2024.

Losses arrive early

Charge-offs have reached 6.8% of the 44 North Carolina practice loans paid out from FY2017 through FY2021, and the five-year figure is the same 6.8%, so the losses so far came early in the term; with loans still open, both are floors. Cancellations are lower, 10.1% at both floor and ceiling on North Carolina's FY2017 to FY2024 approvals. The losses so far fall in the opening years, so the opening ramp and the reserve that carries it deserve the closest study.

In North Carolina, the study for a physician office must test demand for the specialty, the referral sources, the health systems that employ competing doctors, and the payer mix that sets collections. For a practice purchase, it has to verify patient retention after the seller leaves. Cost covers fit-out, equipment and working capital. Coverage should be tested after physician compensation and again at a ramp slower than the North Carolina plan assumes. Should the deal include real estate, an appraiser will value it as medical space, and the study's income figures should support that value. The class has no coding caveat.