SBA 504 Dental Office Feasibility Study in California

Where dentists buy buildings

The 504 program is the real estate program, and California's dental offices use it more than any other state: first by number of loans, with dental office the third-ranked class among 39 in California. The file has 388 approvals from FY2017 to FY2026 and $336.0 million in gross dollars. This route finances buildings bought or built by practice owners, which a 7(a) view would blur. There are no franchised units, at 0.00% of loans.

Loan size

The median of $661,000 is 1.10x the national 504 median for dental offices. The middle half runs from $415,000 to $1.1 million, a tight band that suggests many projects of similar size: a single-practice condo or small building. Because 504 financing sits behind a first mortgage from a bank, the figure printed here is only the program's own part of the capital stack.

The clean charge-off record

The cell's defining feature is its record on losses. Not one of the 191 loans funded between FY2017 and FY2021 has a charge-off on file, at 0.00% so far and 0.00% by the fifth year. Cancellation is no lower than 16.7% for approvals from FY2017 to FY2024, and 22.3% when loans not yet disbursed are counted. In plain terms, loans that close tend to perform, while a meaningful minority never close. Both are floors, so a lender should not treat the zero as a promise.

Development companies and counties

The 504 table lists certified development companies, not banks. Business Finance Capital has 63 loans, CDC Small Business Finance Corp. 60, California Statewide Certified Development Corporation 57 and Bay Area Employment Development Company 57, with The Mortgage Capital Development Corporation at 55. These are holder records in SBA's file. The nearness of those totals shows a market with several active participants, not one dominant provider. Los Angeles County has 94 loans, Orange 40, San Diego 36 and Santa Clara 25. Volume peaked at 74 loans and $55.4 million in FY2021 and has run at 24 to 28 loans a year since FY2023.

What a California dental building study has to test

Here the practice analysis and the real estate analysis have to be done side by side. On the practice side: patients, payer mix, operatory count and the production per chair that supports the occupancy cost. On the real estate side: whether to own, the price per square foot against comparable medical space, the cost of dental build-out and the rent the practice would otherwise pay. The combined payment needs coverage even on a slower ramp, and the appraisal will need both a going-concern and a real estate view.