SBA 7(a) Medical Office Feasibility Study in Arizona

Arizona physicians' offices: bigger loans than elsewhere

Medical offices for physicians are the fourth-ranked class in Arizona, and the state holds rank 7 under the program, with 246 approvals from FY2017 to FY2026 worth $169.4 million. Our test flags the ticket: a $350,000 median lands at 1.39x the nationwide 7(a) benchmark, and $122,000 to $916,800 marks the middle half. Franchising is almost absent at 1.6% of loans, so these are independent practices, often borrowing to acquire or expand rather than to open from nothing.

Holders and geography

Wells Fargo Bank National Association is first with 40 loans and $30.1 million, JPMorgan Chase Bank, National Association second with 23 and $16.6 million, PNC Bank, National Association third with 18 and $7.7 million. Two more holders tie at 14 loans each: Newtek Bank, National Association with $6.2 million and The Huntington National Bank with only $3.1 million, a notably small average. Maricopa County has 188 loans, Pima 25, Mohave 10, Pinal 9 and Yavapai 8, while Graham has 2 and Cochise, La Paz, Navajo and Yuma 1 each. Rural practices appear only rarely.

Outcome floors

At least 12.8% of approvals through FY2024 were cancelled, or 13.3% counting loans still undisbursed. Charge-offs are low: the 117 loans funded in the early cohort show 2.6% written off to date and 1.7% inside five years. Open loans mean all of these are minimums, and the low charge-off floors sit beside a cancellation rate that is not small.

Testing an Arizona practice

Patient demand tops the list: growth and age mix in the service area, the physicians already practicing there, and referral relationships a new office can count on. A study should examine payer mix and reimbursement, staffing, and the ramp from opening to full schedule, then compare buildout and equipment costs with a ticket near $350,000. Where the borrower buys a suite, a different physician should be able to pay the rent the appraisal assumes. Run coverage with a slow schedule and delayed payer enrollment, which can postpone revenue for months, and state how the practice will bridge that gap with working capital. Under 7(a) the loan comes from a private bank with an SBA guarantee on part of it.