How do you finance the purchase of a physical therapy practice?

Who can own the practice, and who treats

Physical therapists are licensed by the state, and some states limit who may own a practice that bills for physical therapy, or require that a licensed therapist direct the clinical work. The first question for a buyer who is not a therapist is whether the state allows the ownership structure at all; the second is who will be the licensed clinical director after closing. A lender will not get far into the file until both have clear answers, usually from healthcare counsel.

A therapist buying the practice they work in is the easiest file for a lender: the buyer is already known to the patients and referral sources and already carries a caseload. A non-clinical operator or an investor-backed buyer can be financed too, but needs a clinical leader in place and management experience the lender can see on SBA Form 1919. See buyer industry experience requirements.

The SBA lending data for therapy and audiology offices shows an industry with many start-up clinics borrowing to open, a noticeable number of owners using SBA 504 for their buildings, and acquisitions making up a smaller share of approvals than across the program. Acquisition loans run several times the industry's typical loan, so a purchase gets a fuller read than the smaller loans that make up most of the industry's SBA borrowing.

Collections by payer

A therapy practice's revenue is what payers actually pay, and different payers pay very differently for the same visit. Lenders ask for collections, not charges, broken down by payer, because the mix tells them how much each visit is worth, how quickly the cash arrives and how exposed the practice is to a rate change it cannot negotiate.

Lenders read the payer mix against the year it came from. A practice whose commercial rates were renegotiated recently, or whose Medicare share has grown, will earn differently next year even with the same visits.

Visits, therapist productivity and referral sources

Behind collections sit a handful of operating figures a practice-management system can produce: visits per week, new evaluations per month, visits per plan of care, the cancellation and no-show rate, collections per visit, and visits per therapist per day. Lenders ask for them by month over two or three years. They show whether revenue comes from steady referrals and full schedules, or from one busy therapist working long days.

New patients come mostly from referrals: orthopedic surgeons, primary care physicians, sports medicine groups, employers and, increasingly, patients who come directly where state law allows. A lender wants to know how many referral sources the practice has, how much of new-patient volume comes from the top few, and whether those relationships belong to the practice or to the selling therapist personally. A surgeon group that opens its own therapy service can take a large share of referrals in a year. Where physicians have any ownership or financial arrangement with the practice, lenders will want counsel's view that it complies with the federal referral and anti-kickback rules.

Therapist retention matters as much as referrals. Patients bond with their therapist, and a therapist who leaves for a competitor down the street can take patients and referral relationships. Lenders look at therapist tenure, pay against the local market, and any non-solicitation agreements, and they treat a practice where the seller carries the largest caseload as the riskiest version of this business.

The cash gap after closing

This is where therapy practice purchases most often run short. Two things happen at once. First, in an asset purchase the seller usually keeps the receivables for visits before closing, so the buyer starts with an empty receivables ledger and a full payroll. Second, depending on how the deal is structured, the practice may need to update or re-establish its enrollment with Medicare, Medicaid and commercial payers under the new owner, and claims can be held or delayed while that is processed.

A simple case: a practice collects 100 a week, and payers typically pay several weeks after the visit. On day one the buyer pays therapists and rent, but the first collections from the buyer's own visits arrive weeks later, later still if enrollment holds up claims. A buyer who has not planned for that funds several weeks of payroll from personal savings. Lenders who know the industry build that working capital into the loan; our page on working capital at close explains how it is sized.

Whether the practice's provider numbers and payer contracts carry over depends partly on whether it is an asset or stock purchase. A stock purchase keeps the existing entity and its enrollments, but also its history, including any payer overpayments that could be recouped later. An asset purchase leaves most of that history with the seller but may mean new enrollments. Healthcare counsel should settle the approach before the lender's term sheet, because it changes the working capital the loan must carry.

Ask the seller for a payer-by-payer list of which contracts can be assigned, which need consent, and which require new enrollment. It decides how much working capital the loan needs.

Compliance history

Therapy billing is detailed: codes by timed units, plans of care that must be certified, documentation that supports medical necessity. Payers audit it, and an audit can reach back over past claims. A lender will ask whether the practice has had payer audits or recoupments, how documentation is reviewed, and whether billing is done in-house or by an outside company. In a stock purchase the buyer inherits the exposure; in either structure buyers commonly negotiate an escrow or holdback to cover claims discovered after closing.

Space, equipment and real estate

Most clinics lease space in medical office buildings or retail centers, and the equipment, from treatment tables and exercise equipment to modalities, is modest collateral. The lease matters more: a clinic's referral relationships and patients are tied to its location, so a lender wants the lease assigned to the buyer with enough remaining term. See lease assignment.

Where the seller owns the building, it can be bought with the practice. A 7(a) loan can finance the real estate share over up to 25 years, and SBA 504 finances owner-occupied property, typically 50% from a bank, 40% from the CDC and 10% from the borrower, where the business occupies at least 51% of an existing building. Our pages on buying a business with its real estate and 7(a) vs 504 cover the choice.

How the purchase is usually structured

The seller often treats patients, and that runs into SBA's transition rule. In a complete change of ownership the seller may not stay as an owner, officer or employee, and may consult for up to 12 months, or up to 24 months under SOP 50 10 8.1 from 1 October 2026. A buyer who needs the seller to keep treating patients for years is really proposing a different deal, and our page on partial changes of ownership explains how those are financed. From 1 October 2026 every change of ownership also needs financial due diligence, which in a therapy practice centers on collections by payer and the quality of the billing.

What goes in the file

• The practice's business tax returns for 2–3 years, P&L and balance sheet, and a year-to-date P&L through last month-end
• Its latest full year of figures, never an older year, and the signed letter of intent
• Collections by payer and by month, with visit counts and new evaluations
• Therapist roster: license, tenure, pay and caseload
• Referral sources for new patients, by year
• AR aging by payer, and any audits or recoupments
• The clinic lease and equipment list, and a debt schedule
• For the buyer: personal tax returns for 2–3 years, a personal financial statement and a resume

Once they are in, Transparent builds the full lender package in a day, then takes it to the lenders in the book that fit, including the 278 that write SBA 7(a) and 504. Built by hand, the same package takes at least a week.