What is a commercial real estate loan?
A commercial real estate (CRE) loan is financing used to acquire, refinance, or renovate property intended for business use. For small businesses, CRE loans typically secure the loan with the property itself and are structured around the asset, its projected income, and the borrower’s business profile. Loan terms, amortization, and eligibility vary by lender and loan product.
Common uses for physical therapy practices
- Acquiring a clinic location — purchase of an existing building or a new construction site tailored to clinic needs.
- Renovations and build-outs — customizing space for treatment rooms, accessibility features, and specialized equipment.
- Refinancing existing property debt — replacing current loans to adjust repayment structure or consolidate obligations.
- Expanding to additional locations — financing multiple sites or a larger facility to accommodate growth.
- Purchasing property as an investment — holding real estate as an asset separate from clinic operations.
Typical eligibility considerations
Eligibility standards differ by lender but generally focus on several practical factors:
- Property type and value: Lenders review the condition, location, and market value of the real estate used as collateral.
- Business financials: Historical revenue, profit margins, and cash flow from the practice are commonly evaluated to assess repayment capacity.
- Borrower credit profile: Personal and business credit histories often influence loan terms and availability.
- Experience and management: Lenders may consider the owner’s industry experience and stability of operations.
- Down payment or equity: Commercial loans often require a substantial down payment or existing equity in the property.
- Lease structure: If the practice will lease rather than own the property, lease terms and landlord approvals can matter.
Key risks and considerations
- Collateral risk: The property secures the loan, so default can lead to loss of the facility and disruption of operations.
- Cash flow impact: Larger monthly payments or balloon payments can strain operating cash flow, especially in lower-revenue periods.
- Market exposure: Local real estate market declines or reduced demand for clinic space can affect property value and resale options.
- Regulatory and zoning issues: Medical facility requirements, accessibility standards, and local zoning can affect permitted uses and renovation costs.
- Interest and payment structure complexity: Different amortization schedules, adjustable terms, or prepayment terms can alter long-term costs.
- Operational disruption: Construction, renovations, or a change of location can interrupt patient services and revenue generation.
Alternative financing options
Other sources of capital can complement or substitute for a commercial real estate loan depending on needs and circumstances:
- Small business loans and lines of credit — short- to medium-term borrowing for working capital or smaller projects.
- Equipment financing — loans or leases specifically for therapy equipment, preserving real estate for other financing.
- SBA 7(a) and 504 loans — government-backed programs that some practices use for real estate and fixed-asset financing (subject to program rules).
- Seller financing or lease-to-own arrangements — negotiated terms with a property seller or landlord that alter upfront capital needs.
- Private lenders or investors — alternative capital sources that may offer different structures than traditional banks.
Explore financing options
This resource provides general information about different financing products.
This content is for informational purposes only and does not constitute financial advice or a loan offer. Loan eligibility, terms, and approval are determined by lenders based on individual review.
Part of our complete guide to commercial real estate loans — compare programs, costs and lender requirements across every industry.