Most practice acquisitions over $750K use a blend of SBA financing and a seller note. Here's exactly how the layers work together — and the standby rule that catches sellers off guard.
Most larger practice acquisitions aren't pure cash or pure seller financing — they're a blend. Here's how the pieces fit together.
This is the single most misunderstood part of SBA-plus-seller-financing deals, and it directly affects your cash flow after closing.
When an SBA loan is part of the deal, the SBA typically requires your seller note to go on full standby for a period — usually 24 months from closing. During standby, you receive no payments on your note. The buyer is only making payments to the SBA lender. Your note balance continues accruing interest, but nothing is actually paid to you until standby ends.
After the standby period, normal monthly payments to you resume for the remainder of your note's term. Many sellers negotiate a somewhat higher interest rate on their note specifically to offset the standby period — this is standard practice and acceptable to the SBA.
If your deal includes an SBA loan, expect zero payments on your seller note for roughly the first 24 months. Plan your personal cash flow around that gap before you sign anything.
SBA 7(a) loans have a historical default rate of roughly 1–2% overall — and licensed physician buyers, with professional reputations and personal guarantees on the line, represent some of the lowest-risk borrowers in any asset class. That's a big part of why this three-layer structure has become the default for practice acquisitions above roughly $750K, and why sellers who understand it going in negotiate far better terms than those who discover the standby requirement mid-deal.
Important Disclaimer: The information on this page is for educational purposes only and does not constitute legal, financial, or tax advice. Every practice sale is unique. PracticeAmerica strongly recommends consulting a healthcare M&A attorney, a CPA experienced in medical practice transactions, and a financial advisor before making any decisions regarding a practice purchase or sale.
PracticeAmerica connects you with SBA-experienced lenders and buyers who already understand how this structure works.