Financing a dental practice purchase: SBA 7(a) basics

The SBA 7(a) program is one way buyers finance a business purchase. This post explains what the U.S. Small Business Administration (SBA) says about the program and what the American Dental Association (ADA) says about practice loans. It is general education. It is not loan, tax or legal advice. A lender, a CPA and an attorney decide what fits your deal.

What is an SBA 7(a) loan?

An SBA 7(a) loan is a loan from a participating lender, with part of the loan guaranteed by the SBA. The SBA calls it “SBA’s primary business loan program.” The guarantee lets lenders finance small businesses that have special requirements.

The SBA lists these uses: real estate and buildings, working capital, refinancing business debt, machinery and equipment, furniture and supplies, and changes of ownership, complete or partial. The SBA’s lender page also lists “Acquire a business or partial ownership in a business.” A practice purchase can fall under that kind of use. The lender decides whether your deal qualifies.

How does a buyer apply for a 7(a) loan?

You apply through a lender, not the SBA. The SBA says it does not provide 7(a) loans directly to borrowers. It also says, “You will always work directly with your lender and not with SBA.”

The SBA offers two aids. Its Lender Match tool connects you with participating lenders. Its district offices give in-person, online or phone help. What goes in the application depends on the loan size and the lender’s process, so the lender tells you which documents to prepare.

What limits and terms does the SBA set?

The SBA sets maximums. The lender and borrower negotiate the rest. The table shows what the SBA pages say as of 2026.

Program rules can change. Check the SBA pages and ask the lender which rules apply on the day you apply.

Who is eligible for a 7(a) loan?

The SBA lists conditions for the business. It must be an operating, for-profit business located in the U.S. It must be small under SBA size rules and not on the ineligible list. It must also be creditworthy and able to show “a reasonable ability to repay the loan.” One more condition: the business cannot obtain the credit it wants on reasonable terms from non-government sources.

For a buyer, the lender usually looks at both you and the practice you plan to buy. That makes the records in a due diligence review matter twice: once for you, once for the lender.

What does repayment look like?

The SBA says most 7(a) term loans are repaid with monthly payments of principal and interest from the cash flow of the business. For a fixed-rate loan, payments stay the same because the interest rate is constant. For a variable-rate loan, the lender may require a different payment amount when the rate changes.

That detail affects planning. A practice buyer should know which type of rate the loan carries and what the payment could be if the rate moves. Ask the lender to show the payment schedule in writing, and ask your CPA to test it against the practice’s cash flow.

What does the ADA say about practice loans?

The ADA gives buyers plain steps for any practice loan, not only SBA loans:

1. Start early. Loans need a lot of documentation, and the seller’s pace is out of your control.
2. Interview at least three banks and compare the offers.
3. Look past the rate. The ADA says to see how “the term length will affect your total payoff” and to check for prepayment penalties.
4. Ask about dental-specific lending. The ADA says banks with dental services understand practice finances and may close faster.
5. Check the cap. The ADA says most banks will not lend more than 85 percent of the prior year’s collections, so a premium-priced practice may need cash from the buyer.

The ADA also says most banks will lend the purchase price plus extra funds for working capital or to buy the current accounts receivable. Treat that as a general description, since each lender sets its own policy.

What should a buyer ask a lender?

Take a short list to every lender and compare the written answers:

• Is this a practice loan under the SBA 7(a) program or a conventional loan?
• What is the rate, is it fixed or variable, and what does the payment do if it changes?
• What is the term, and are there prepayment penalties?
• How much cash must the buyer bring?
• Will the loan cover working capital and receivables?
• What documents do you need, and by what date?

Ask for the answers in writing, so you can compare lenders on the same points. Then take the answers to your CPA. The ADA advises asking lenders about their policies and consulting a CPA “to understand how a practice loan will fit into your complete financial picture.”

Where does financing fit in a practice purchase?

Financing sits after valuation and review, and before closing. Lenders usually want to see the same records a buyer reviews, so keep the files organized and share them on a schedule that the lender sets. The price comes from a practice valuation. The buyer then confirms the numbers, and the lender checks them again. Read the buying a dental practice guide for the full sequence. For the upstream numbers, see dental school debt, since new owners often carry both loans.

Next step

Read the buying a dental practice guide and the dental practice ownership guide. Contact Dr. Copeland about dental practice consulting.