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Medical office buildings are a staple of commercial real estate lending. Physician practices, dental offices, ambulatory surgery centers, and other healthcare tenants occupy these properties. When your practice owns the building, you benefit from equity build-up and control. SBA 504 and conventional CRE loans are the primary tools for financing medical office. This guide covers program options, down payment, terms, and how medical office is evaluated by lenders.
Why Medical Office Buildings Are Financeable
Lenders like medical office for several reasons. Healthcare is essential; demand is relatively stable. Medical tenants often sign longer leases. The assets are purpose-built and have clear utility. Owner-occupied medical office (your practice uses 51%+) qualifies for SBA programs with favorable terms. See SBA loan for owner-occupied commercial property and medical practices business financing.
SBA 504 for Medical Office Buildings
SBA 504 is well-suited for owner-occupied medical office. Structure: 50% from a bank first mortgage, 40% from a CDC second, 10% borrower equity. You put down 10%, get long-term fixed rates on the 504 portion, and build equity. SBA 504 can finance acquisition, construction, and renovation. See SBA 504 vs conventional CRE.
SBA 7(a) for Medical Office
SBA 7(a) can combine real estate with practice acquisition, equipment, and working capital. Use 7(a) when you need a single loan for multiple purposes. For real estate-only, 504 often offers better rates and terms. See SBA 7(a) vs 504.
Conventional CRE for Medical Office
Conventional lenders finance medical office for qualified borrowers. Typically 20–30% down, 5–25 year terms. Strong credit (680+), solid practice cash flow, and favorable property metrics support approval. Conventional may close faster than SBA. See what credit score is needed for a CRE loan.
Bridge Loans for Medical Office
When timing is urgent, bridge loans close in 7–21 days. Use bridge to acquire, then refinance into SBA or conventional. Bridge is short-term (12–36 months), interest-only. See bridge loan for commercial property acquisition.
Typical Loan Terms by Program
| Program | Down Payment | Term |
|---|---|---|
| SBA 504 | 10% | 20–25 years (504 portion) |
| SBA 7(a) | 10–15% | 10–25 years |
| Conventional | 20–30% | 5–25 years |
| Bridge | 25–35% | 12–36 months |
See down payment for commercial property loans.
Owner-Occupied vs Multi-Tenant Medical Office
Owner-occupied: Your practice uses 51%+ of the building. SBA programs apply. Best terms and lowest down payment. Multi-tenant: You own the building and lease to multiple medical tenants. May still qualify as owner-occupied if your practice is anchor. Investment medical office (no owner occupancy) follows different guidelines. See owner-occupied vs investment CRE.
Build-Out and Tenant Improvements
SBA 504 and 7(a) can include renovation and build-out. Medical offices often need specialized finishes: plumbing, gas, HVAC, lead shielding. Include these in your project budget. Soft costs (architect, permits) may be financeable. Discuss scope with your lender. See medical and dental equipment financing for equipment needs.
Location: Hospital-Adjacent vs Freestanding
Hospital-adjacent medical office often has strong demand from physicians who want proximity to the hospital. Lenders may view it favorably. Freestanding medical office in strong demographics (population, income, aging) is also financeable. Location, visibility, and parking matter. Lenders evaluate market fundamentals.
What Lenders Evaluate
Key factors: practice revenue and cash flow, DSCR, credit profile, property condition and location, lease terms (if multi-tenant), and specialty. See what lenders look for in a CRE loan.
Bottom Line
Medical office buildings are readily financeable through SBA 504, SBA 7(a), conventional, and bridge programs. Owner-occupied medical office gets the best terms. Prepare practice financials, property information, and a clear use of funds. Get matched with CRE lenders for medical office, or explore commercial real estate loan options.