SBA 7(a) Medical Office Feasibility Study in Virginia

Physician offices in Virginia

Virginia physician practices financed under SBA 7(a) make up 97 loans from FY2017 to FY2026, worth $35.1 million. The class is tenth of 39 in the state, and Virginia is 20th by count. Typical loans are modest: a $189,000 median that is 0.75x the national reading for the class, with the central half between $100,000 and $461,700. Franchising is nearly absent, at 3.1% of loans.

Fairfax and the cancellation rate

Fairfax County has 37 loans, far ahead of Loudoun at 6, Virginia Beach City at 5, and Chesapeake City, Isle of Wight, Prince William and Richmond City at 4 each. Cancellation after approval has a floor of 15.3% and a ceiling of 16.7%. A practice that seeks financing will often be waiting on credentialing, payer contracts or a lease, and the data cannot say which of these caused a cancellation, but a study should expect to deal with such issues.

Holders and charge-offs

The largest holder in SBA's data is Wells Fargo Bank National Association, with 12 loans adding to $4.7 million, while the 10 loans at Readycap Lending, LLC reach $6.0 million, so its average runs higher. At 7 loans apiece come Manufacturers and Traders Trust Company ($703,000) and BayFirst National Bank ($1.2 million); TD Bank, National Association trails with 5 loans, $1.4 million. Among the 35 early loans that disbursed, 2.9% is the charge-off floor on both measures. Loans still open could raise either. Volume was 5 loans and $1.4 million in FY2017, 9 and $2.8 million in FY2021, and 10 and $2.6 million in FY2026.

What the study must show

A physician practice sells appointments, so a study should translate the practice's specialty into patient volume. It should count the patients the catchment can supply, the other practices and health systems competing for them, the share of revenue that comes from insurers whose rates the practice does not control, and the time to build a panel. Fit-out, equipment and working capital for the early months must be tested against a loan near $189,000, with debt service covered while the practice ramps. For a purchase of an existing practice, the study should test the seller's collections and the stability of the referral base. The appraisal has to separate the value of the practice from that of any real estate. Coding note: the class is physicians' offices, so dentists, therapists and clinics under other codes are read from their own pages.