Practice Acquisition Financing Checklist

A practice acquisition financing checklist is the ordered set of documents, valuations, and funding pieces you assemble to buy an existing dental, medical, veterinary, optometry, or therapy practice — typically a letter of intent, three years of the seller's tax returns and profit-and-loss statements, a production-and-collections report, an equipment and lease schedule, a chart-count or patient-panel summary, your own credit and liquidity profile, and a lender term sheet that covers the purchase price plus working capital for the first few payroll cycles. The single biggest reason a signed deal stalls at the closing table is not the price; it is a funding gap between what the acquisition lender will advance against goodwill and what you still owe on day one for staff, supplies, and the transition. This checklist walks the full sequence in the order underwriters expect it, and shows where a fast, revenue-based bridge covers the working-capital piece a conventional acquisition loan leaves open.

The core document stack underwriters ask for first

Practice acquisitions are underwritten on the target's cash flow, not just yours. Before any lender issues real terms, they rebuild the practice's earning power from the seller's records. Have these ready before you shop for money, because chasing them mid-deal is what blows past the seller's closing deadline:

• Three years of business tax returns and year-to-date P&L for the practice you are buying — the backbone of every valuation.
• Production and collections reports straight from the practice-management system (Dentrix, Open Dental, Eaglesoft, AVImark, a medical EHR). Production is what was billed; collections is what actually landed in the bank. Lenders lend against collections.
• Provider and payer mix — how much revenue rides on the departing owner personally, and the split between insurance, government payers, and cash/fee-for-service.
• Active patient or chart count (usually patients seen in the last 18-24 months) — the real asset you are buying is the recurring panel.
• Equipment schedule, lease or real-estate terms, and any existing UCC liens on the practice's assets.
• Your personal financials — two years of returns, a personal financial statement, and credit. Acquisition lenders still want a clinician-owner with skin in the game.

A clean stack signals a clean deal. A stack with gaps signals risk, and risk is repriced as a lower advance or a slower yes.

Valuation: what the practice is actually worth to a lender

Sellers price on a multiple of collections or on adjusted EBITDA; lenders finance on normalized cash flow. The number that matters for financing is seller's discretionary earnings (SDE) — the practice's profit after you add back the departing owner's salary, personal perks run through the business, one-time expenses, and non-cash items like depreciation. That recast figure tells the lender whether the practice can service new debt and pay you a living wage.

Two acquisitions with identical sticker prices can finance completely differently. A practice collecting 98 percent of production with a broad payer mix and low owner-dependence supports far more leverage than one where the selling doctor personally produces 70 percent of revenue and a third of receivables are 90-plus days old. Before you fall in love with a purchase price, run the recast and ask the real question: after debt service, does the transition still throw off cash?

Mapping the full cost of the deal — not just the price

New buyers budget the purchase price and forget that the price is only the first check. The gap between "loan approved" and "doors open and staff paid" is where deals get stressful. Build the total-need picture before you pick funding sources:

• Purchase price / goodwill — the bulk, usually covered by an SBA 7(a) or bank acquisition loan.
• Working capital for the transition — payroll, supplies, lab fees, and rent for the first 60-90 days before collections from your production start clearing. Insurance reimbursement lags 30-45 days, so you carry the practice on cash before revenue catches up.
• Re-credentialing downtime — new-owner enrollment with payers can pause reimbursement for weeks. That is a cash-flow hole, not a P&L problem.
• Equipment refresh or small buildout — the item the seller deferred that you cannot.
• Retention and closing costs — legal, valuation, staff retention, and rebranding.

The purchase loan almost always funds line one and sometimes a slice of line two. Lines two through five are where a working-capital layer earns its place.

Where revenue-based funding fits the checklist

An SBA or bank acquisition loan is the right instrument for the goodwill purchase — long amortization, the lowest cost of capital, and no reason to use anything else for the core buy. But those loans are slow (60-90 days is common), they underwrite your historical income heavily, and they rarely release enough working capital to carry the first two payroll cycles of a practice that hasn't re-credentialed yet. That is the gap.

A revenue-based advance from an MCA marketplace is built for that specific gap. Approval leans on bank deposits and revenue rather than credit score, so it clears in roughly 24 to 48 hours, funds from about $10,000, and works with FICO down to around 500. Repayment flexes as a share of receipts, so it breathes with collections during the slow re-credentialing weeks instead of demanding a fixed payment before revenue exists. It is never a replacement for the acquisition loan and it is never guaranteed — it is the bridge that keeps payroll met while the permanent financing and the payer enrollments catch up. See our merchant cash advance overview for how the mechanics and cost work before you layer it in.

Realistic example: funding a dental practice buy-in

The figures below are for example only to show how the pieces stack — not a quote, and not a promise of terms. Every deal underwrites on its own bank statements and collections.

Notice the pattern: the big, cheap, slow money buys the practice; the small, fast, flexible money keeps it running while reimbursement re-starts. The bridge is sized to a couple of payroll cycles, not to the whole deal — using an advance to fund the goodwill purchase itself would be the wrong tool.

Decision framework: when the bridge helps and when to skip it

A revenue-based bridge works best when:

• The acquisition loan is approved but slow, and the seller's timeline won't wait 90 days.
• You face a re-credentialing gap and need to cover 1-2 payroll cycles before payer reimbursement re-starts under your ownership.
• The practice already generates steady, verifiable bank deposits — the advance repays out of real, recurring collections.
• Your credit sits below conventional thresholds (FICO 500-600s) but the practice's cash flow is strong.
• You need a small, time-boxed sum — roughly $10,000 to a few tens of thousands — for a defined transition cost.

Avoid the bridge when:

• You are trying to finance the goodwill purchase price itself — that belongs on long-amortization acquisition debt, not a short revenue-based product.
• The target practice's collections are thin or erratic; a flexible payment still comes out of receipts you may not have.
• Your SBA loan already releases ample working capital and the seller will wait for it.
• You have not yet recast the seller's numbers and don't actually know the cash-flow gap you're covering.

The test is simple: use the bridge for a known, short, revenue-backed gap — never as the foundation of the deal.

Closing checklist and sequencing the money

Order matters. Line up the permanent financing first, then slot the bridge so it funds the day-one working-capital need without over-borrowing:

• Weeks 1-2: Sign the LOI, request the seller's full document stack, and recast to SDE.
• Weeks 2-6: Apply for the acquisition loan; order the formal valuation; verify the lease assignment and any liens.
• Weeks 4-8: Model the transition cash-flow gap (payroll, supplies, re-credentialing). This is the exact figure your bridge should cover — no more.
• Closing week: If the acquisition loan's timeline or working-capital release leaves a gap, submit 3-6 months of the practice's bank statements to a revenue-based marketplace for a 24-48 hour decision.
• Day one to 90: Draw only what the modeled gap requires; let the bridge repay out of collections as your production and re-credentialed reimbursement ramp.

Fund the practice with the cheapest capital available, and use fast money only to buy time — never to buy the practice.