E814 | How Smart Clinic Owners Finance Growth

Funding Your PT Clinic Expansion: SBA Loans vs. Lines of Credit

If you’re thinking about growing your clinic, one of the first questions you’ll face is:
How are you going to pay for it?

In this episode of the P.T. Entrepreneur Podcast, I break down two of the most common—and effective—ways to capitalize your clinic expansion: lines of credit and SBA expansion loans. We’ll cover when to use each, the pros and cons, and what mistakes to avoid so you don’t run out of cash at the worst time.

Cash = Extra Lives

Here’s the mindset shift you need:
Cash isn’t just money—it’s survival.

Think of it like extra lives in Mario. Blow through your cash reserves during an expansion, and one unexpected hit (like a pandemic or local economic shakeup) could knock you out of the game completely.

That’s why smart clinic owners borrow money strategically—so they can grow without draining their reserves.

Option 1: Line of Credit

A line of credit gives you fast, flexible access to capital. You can use it when you need it, repay it on your terms, and tap into it again later.

Pros:

• Quick approval and access

• Great for small projects or cash buffer

• Only pay interest on what you use

Cons:

• Higher variable interest rates (often tied to prime + 2–7%)

• No structured repayment—easy to mismanage if undisciplined

• Often requires a personal guarantee

Best for:
Satellite offices, surprise costs, cash flow cushioning, or small buildouts under ~$50K.

Option 2: SBA Expansion Loan

An SBA Expansion Loan (specifically the SBA Express Loan) offers lump-sum capital with structured repayment and longer terms.

Pros:

• Up to $500,000 based on your business profit

• 10-year repayment term = low monthly burden

• Can be used for major projects, hiring, or even buying another clinic

• Fast approval (2–4 weeks)

Cons:

• Tied to the prime rate (variable interest)

• Requires solid financials and 2+ years in business

• Personal guarantee required

Best for:
Big buildouts, large-scale hiring, full space renovations, or buying an existing clinic.

So, Which One’s Better?

It depends on your goals.

• Need $15K to get a small space off the ground? Line of credit.

• Planning to move into a 4,000 sq ft standalone clinic? SBA loan.

• Want to keep your cash untouched but feel secure? Keep a line of credit open just in case.

In some cases, it makes sense to use both. Just remember: the tool doesn’t matter as much as your plan.

Final Thought

Don’t borrow if you don’t know how to use the money.
Getting a $500K loan when you don’t understand your KPIs, hiring needs, or marketing ROI is a disaster waiting to happen. Make sure you’re clear on why you're borrowing, how you'll deploy that capital, and what success looks like.

Want Help Planning Your Expansion?

✅ Join our Free 5-Day Challenge: physicaltherapybiz.com/challenge
✅ Book a Free Strategy Call: Click here to schedule
✅ Listen to the Full Episode: P.T. Entrepreneur Podcast

Smart borrowing is a superpower—especially when you're growing.
Know your numbers. Protect your cash. Expand with confidence.

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Ready to elevate your practice? Book a call at the link below with one of our expert consultants today and start your journey to delivering unparalleled physical therapy.

Podcast Transcript

Danny:  Hey, Dave Matta here, founder of PT Biz. And one of the things I spend most of my time on, uh, when I'm consulting with clients these days is finance, especially when people are looking to expand their business. And that's exactly what we're gonna get into today. So we're gonna talk about ways in which you can capitalize expansion in your PT clinic as you're growing and.

We're gonna talk about two primary ways you can do this, the pros and cons of both, um, and maybe, uh, scenarios in which you want to use one or the other, or sometimes using both together. So we're gonna talk about a line of credit and we're gonna talk about an SBA expansion loan in particular. Now, if you are listening to this on the podcast, this may be one of the ones that you want to head over to YouTube for, and actually watch the video because I'm gonna get into a little bit more specifics around some of the math with these.

But if you're more of an auditory learner, you don't need the visual side, that's cool too. Uh, you can always use it as a reference. So this is an area that I can tell you I learned a lot of, of, um, what not to do really the hard way. So when I work with our clients and we're helping them with expansion, um, you know, it's a really, it's a really important.

Part of, uh, the growth cycle of the business, especially when you look at the first expansion cycle. So most people are going to bootstrap, meaning they're gonna take any money out, they're gonna self-finance the, uh, the, the start of their cash based clinic, usually in like a sublease space, which is very inexpensive.

And, uh, there's a lot of pros to that, right? But as your schedule gets busier. You need to make the decision of do you wanna stay and this be a lifestyle business, super, super low overhead, but obviously very limited upside, or do you want to grow into a standalone space in order to do that? How are you going to capitalize it?

Because you can self-finance, um, which is, there's, there's, that is one way to do it. That that can be a bit of a sketchy way to do it. And I'll explain why. Uh. There's also lines of credit and then there's expansion loans specific from the SBA or small business administration. So that is a government backed, uh, business loan, and I'll talk about the specifics of that as well.

But these are the two options that a lot of people will use and the ones that we typically recommend. But if you want to self-finance expansion of moving into a space. Um, you have to keep in mind your cash that you have is, it's, it's, it's like your, it's like your lives in a video game. Okay? So back in the day when, when I was a kid, we were, I was playing a lot at like, Mario three, right?

And fantastic game. Um, get the warp whistles, you know, get to the end, all that stuff. We were, my brother and I were obsessed, but. You know, you could, you could get extra lives, right? And it was really important, especially as you were trying to beat the game, because you need the extra lives. 'cause you know you're gonna, you're gonna die at some point in time and you need the extra lives.

You can stay in the game. Cash for entrepreneurs is like extra lives in Mario as you're trying to, you know, beat these different levels. So the ability to tap into cash is very important during. Periods where you're going through growth cycles. Here's a perfect example. What if you decided in 2019 that this was the year that you needed to aggressively expand your business and you decided to use all your cash reserves to do so, and then all of a sudden March, 2020 happens?

You know, the world shuts down and there's nobody lending money. Two businesses, nobody's gonna give you a line of credit. SBA for the time being shut down. They're focused on what to do for PPP loans and lots of other things. You could end up go, you know, going out of business because you run out of cash.

So, cashflow management is very important and you don't know, uh, when things are gonna happen both positively and negatively around the world. You know, it just, it is what it is. So you need to be very conservative of cash management. In order to stay in the game, the whole point of this is to stay in the game, right?

We want you to grow to wherever your vision is, but not, uh, you know, not get kicked outta the game because you ran outta lives, right? And in this scenario, it's cash. So cash is very important to conserve and have access to. Uh, even if you don't think you need it, it's still very important to have access to, 'cause it gives you options.

And I'll talk about some of that with this as, as we get going. But, um, let, let's talk about. The two ways to capitalize. I prefer people don't necessarily just bootstrap expansions. You can for sure, uh, but I prefer you keep that cash, you borrow somebody else's cash and you pay that back over time so that you have, you have more, uh, likelihood of staying in the game 'cause you have your cash.

So capitalization, uh, capitalization and expansion. Um, options that we have, there's two I talked about. So we got a line of credit. Alright. And then we have, um, a SBA expansion loan. So let's talk about the, the two, what they are, and then I'll give you some scenarios of what they're best used for. 'cause it might apply to the type of expansion you're going through.

Right? So a line of credit, this is, you usually get this at, at a bank, uh, or credit union. Usually it's. In most cases, people get this wherever they have their business bank account, but you don't have to because you can get a line of credit from another bank. They usually want you to have a, uh, an account there.

It's definitely a, a way in which they try to establish more of a relationship, but you know, you can get a line of credit through many other third party lenders. Um, but the pros of this are, they're flexible. Right. You can get these really fast. They're super flexible. Fast access. Like if you have, you know, if I wanted to go to whatever our, you know, our business bank, uh, right now and say, Hey, I need a, a line of credit for a hundred thousand dollars.

Like, they would cool this. It's available when you need it. Go ahead and uh, go for it. Right? Um, but it's because for the bank it's great. It's variable interest. It's tied to the prime rate. Which the prime rate is essentially the, the, the borrowing rate in which everything is based off of for banks and for the SBA, um, and it's gonna be prime plus a certain amount.

Okay? So Prime right now is 7.5%. So a line of credit is gonna be on the low end, 9.5%. That's on the very low end and on the high end it's gonna be closer to like 14. Um, so because it's gonna be prime plus two to 7% roughly, it depends on what you're borrowing. It depends on your credit history, it depends on your history with the bank.

There's lots of factors that go into it. Um, but normally it's gonna be towards the higher end of that. So usually a line of credit is gonna have a higher interest rate, and again, is tied to prime. So it's variable meaning. If the prime rate goes up, which has happened over the last few years, you know, it's gone from like four point a half percent to 7.5%.

It's been as high as like eight point a half percent. Uh, but so you know, if you have a line of credit. And you're borrowing that money and then the prime rate goes up, what you're paying interest on goes up as well. The percentage of interest you pay goes up as well. So it's variable. And it's also, uh, it's not a set amount of time that the payment, uh, is, is is paid back.

Right? So this isn't a five year, 10 year set term. This is literally. Flexible. You pay back what you want, but if you don't, if you don't pay it back, the interest accumulates. Right. So, so it's like a credit card basically, but it's, uh, it's, it's lower interest rate than that. Um, but it's very flexible, so you can use it for many different things.

So I. You repay this as much or as little as you want. So this can be a real advantage for businesses that are going through expansion cycles because what you might have is, uh, a period of compression as far as like net profit is concerned because you're bringing on additional overhead and staff and.

Equipment software maybe. So, you know, as your top line gross revenue is going up, your net profit, like the total amount of net profit percentage wise is gonna go down during that time. 'cause you're reinvesting heavily in the business. Uh, and as that starts to stabilize, your net profit comes up. And that's a period of time where maybe paying these back quickly can, can happen.

But there may be a period of time there where you want the flexibility. Um, and that can be a really valuable thing as long as you pay it back. This is where people get in trouble, is they take these loans out, they take these lines of credit out, they don't. Manage them well, they don't pay them back well, and this in particular, there's no set payment each month.

You have to engineer that in yourself. So this can actually be a negative for a lot of people. Um, and then collateral, sometimes it requires a personal guarantee, but I. It just depends on how much you're taking out. Because if you have equipment in your business that can offset that, and they can, maybe they, they take that as collateral.

You don't have to have a personal guarantee, but oftentimes they want a personal guarantee. That means that you're on the hook to pay for this, even if the business, you know, can't support that with their own assets. So, um, a personal guarantee is something you probably are gonna have, so there's a bit more risk associated with that.

Um, but that's just the kind of businesses we have. We're very. Uh, lean as far as assets are concerned, and much more, you know, people heavy, right? So service businesses. Um, so anyway, the, these are sort of the, the characteristics of this type of a, a vehicle. The other one is an SBA express loan, particular, there's a number of different SBA loans, but the SBA express loan.

Is designed for expansion primarily. Right? And there's, there's some criteria around this that you may not even apply for. Uh, you, you, you may not even check their boxes, right? So, um, that you need to have been in business for a period of time. I believe it's two years. Uh, there's a, you know, a specific amount of like, you know, credit history that they wanna see a credit, um, a number that they wanna see above a certain amount and.

What What is nice about this is a, it's structured, so it's a lump sum. Okay? And you can get up to $500,000. Which the amount you qualify for depends on how much net profit you have in your business. So it's a multiple of the net profit, they call it a debt coverage ratio. Right. And so I'm not gonna go into how they calculate that, but you could get up to $500,000 honestly, as we've helped people, um, apply for or get these loans with like the clients we work with, we have, we actually have a, uh, direct relationship with a, um, with a healthcare lending bank specifically that allows us to sort of streamline this process for our clients as well as we are able to help.

Create really beneficial terms for them. And I'll kind of talk about like, what, what those look like. 'cause you may be able to, uh, negotiate these yourself, but the, the ability to get half a million dollars in an expansion loan, uh, is, it's kind of hard to come by that in a number of different ways, right?

This is a really, really po really, really great loan option depending on what you use it for. But when, when we look at this, the ability to get a big chunk of money. Um, and that is like kind of your, it's flexible. You can use it forever. You want, that is a real value to this loan. Um, it's also fast access.

So if you were to get like an SBA startup loan, you're, it's months and months, uh, lots of documents. If you were to get a loan to buy another business, same thing like lots and lots of paperwork, it's gonna take months. Um, but because this is an expansion loan. It's faster. So that's why they call these express loans.

And what's cool about that is normally people can get funded. They can finish the process, get funded within two to four weeks, which is way faster than a traditional SBA startup loan would be. Right. Um, and then the other nice part about this, honestly, like, I like the fact that there's set monthly repayment amounts.

It's like. A mortgage, it's like rent. It's like, you know, it's, we're used to this, a car payment, whatever, like it's a certain amount. You don't have to think about it. You don't have to sort of manage the, the loan, uh, you just have to pay it every single month. Right. And there can be pros and cons to that because maybe you have fluctuation in, in your ability to repay, uh, during aggressive expansion cycles.

But knowing what you owe is nice. And it can change a little bit, just like a, uh, a line of credit, which I'll talk about here in a second. But typically this is gonna be over a 10 year period of time. So let's, let's talk about debt for a second, because not all debt is the same. Um. You know, there's terrible debt.

There's, there's debt that can be really positive. When we look at expansion loans, when we look at your ability to borrow money and to put that in and reinvest that into your vehicle of your business, to then generate more income, more growth, more jobs, you know, more just size in the business, that is a very intelligent use of, of capital.

Assuming you know what you're doing. Okay, so here, here's, here's the thing with these loans, if you take a half a million dollars out and you have no idea. What kind of ROI you can expect on marketing? What size facility you need, uh, the expansion that you're moving into a, a space, the demographics of the area, how you're gonna hire, you know, being very clear on your KPIs and what your goals are going forward, and why you need to borrow that much money and what you're gonna use it for.

Please don't take a loan out, like it doesn't make any sense. You don't even know what you're doing. It would be like. You going out and buying a a, a Porsche nine 11, that's a, that's a manual, you know, and you don't know how to drive stick, like, don't do it. You're gonna ruin the car. Uh, so you, I, I'm, I'm a big believer in these loans in particular because most of the requirement is you need two years in business before they'll even allow you to apply for and get one of these loans.

So that means you at least have two years of history of showing that you, you're not, you know, gonna screw this up and, and put yourself in a terrible financial position. But the 10 year period, what's nice about that is it's very drawn out. So when you look at loans, you wanna borrow as much money as you can, assuming you're gonna be able to use it effectively over the longest period of time possible with the lowest interest rate possible.

And if possible, a low fixed interest rate is even better. This is why a 30 year mortgage. Is like a gift to people. And for, in fact, Warren Buffet had, I think it said this is like the, the greatest financial gift that people can get is a 30 year fixed mortgage. And it's because you have 30 years. You have 30 years to, for the house where that house probably appreciate the, the, the, uh, amount, uh, because of inflation of what each dollar is essentially worth.

It goes down, meaning the, the amount you're paying is fixed, but each dollar's becoming less valuable, slightly less valuable each year. So by the end of that 30th year, it's just like. Nothing in comparison to the first year. Alright, so when we look at, at these, we say like, the most expensive year for a loan is the first year.

Obviously, uh, that's where you feel it the most. But if you can find a vehicle like that, that's the best option for, for borrowing money. Now, the negative for this, or one of the drawbacks is not fixed interest, right? So this is lower interest than a line of credit, but it's still tied to prime and it's variable.

Which could be, in most cases, it's not I as ideal as a fixed rate, but. What we have to think about is, you know, what, uh, what, what are you trying to do with that? And are interest rates probably gonna go up, or are interest rates probably gonna go down, right? Because that's really what we have to, you know, keep in mind is where are we at as far as interest rates are concerned?

Well, we're probably gonna go into a lowering interest rate here pretty soon. Um, you know, which is really gonna be a, a better place for you to be financially if these are tied to the interest rates going down. Right. So that's something to keep in mind. If you think interest rates are going down, this could be a really positive thing.

Alright. And again, there's also gonna be a personal guarantee assigned to this. And that's just the way it is. You know, there's really no way to get, uh, to, to get around that. So personal guarantee it happens. Um, you know, and you gotta, you gotta take on the risk of, of these assets in order for that to actually, you know, help the business grow and scale.

So, okay. Uh, when do you use these suckers? Right? Well. They, they kind of fit different scenarios, one better than the other. A line of credit really is great if you have smaller needs, right? Let's say you're, let's say you, you don't need as much, let's say you need access quickly. You know, um, you, you aren't exactly sure what the costs are gonna be.

That is where you can get a, a lot of value from these loans because they're flexible and with them being flexible, it allows you to really, um. You know, payback as much or as little as you can at any point in time. Uh, if, let's say, you know, you need a cash buffer, this is actually a really good way to use a line of credit where if you, let's say, want to increase your cash reserves as you're going into an expansion cycle, you can get a line of credit, not actually draw from it.

So meaning you are, you're holding it in your account, but you're not borrowing it. So you have access. So you have access to $50,000 of a line of credit. Uh, it's almost like a secondary cash reserve, but you're not tapping into it for loan purposes and, and you're not paying interest on it if you're not using it.

Versus if you have a fixed rate loan, you're paying interest on that, whether you're using it or not. It's just sitting in the account waiting to be used. So a line of credit credit is really good. If you have variable costs, you don't really know what it's gonna, what it's gonna cost. And, um, it's really good if you don't need as much.

So let's say you're opening a satellite office and it's gonna take $15,000 for you to actually like build this, this new space out. Um, that is a great use of this. So $15,000. Uh, maybe you need equipment, you need, uh, cash to ramp your staff up. Maybe you have additional overhead, things like that. That's where it can make a really big difference.

And it's something that, uh, for a lot of people, this can be a, the perfect loan vehicle for them as far as a small expansion is, is concerned. And again, extra cash for a buffer. This is a big one. It, it just sort of like, makes you feel better. Uh, knowing, okay, I have access to this cash. Uh, we keep a line of credit open in our businesses.

I've only tapped into it one time. Um, and that was actually during expansion period. But we always have it there because it's an additional cash reserve. Again, think of the extra lives in, uh, in Mario, right? Like you're, you're keeping that extra cash on hand. So just in case, and this is security during growth cycles in particular.

So the SBA, what's that best for? Well, the SBA really is best for bigger. Projects, bigger build outs. So let's say I, I'm building out a full standalone space. Let's say I'm moving into like a three, 4,000 standalone square foot standalone space. You know, I want to dump a couple hundred thousand dollars into the equipment, the design, the branding.

I want additional overhead cash reserves for, uh, to, to buffer the cash reserves that I have. Um, and I really want to. Really go for it, make it look really nice, and, uh, and I'm, and I'm building a space I'm gonna be in for the next decade, right? Um, this is where that works really well. So being able to actually have a cash reserve for that is huge.

Uh, and again, this is a fixed amount of, um, of money, so you can get a lot up to $500,000. The other thing, and this is actually a lot of people I'm seeing this happen now that have more of an opportunity for this is potentially even buying existing clinic. So you can use this as an expansion loan, but it's not, um, I.

It's not as stringent in terms of like, uh, limitations of what you can and can't use this for. So if you, let's say you find a clinic and you can buy this clinic for. A hundred thousand dollars and somebody's just like, they're tired of it. They're on their way out, they, but they have a big patient list.

Uh, it's in an area you want the, the space is built out. Well, you might be able to buy that clinic outright. And now you own this other asset, which is another clinic from an expansion loan that you have. So there's a lot of options with this. So anyway, in summary, um, both these have their place and what you gotta keep in mind is what's the intent, but.

Also understand what are you using this for? Because you can use both. You can have both. Um, but you gotta know the math and the purpose of this. So hopefully this helped. Uh, this is a area that we help a lot of people with on the finance side. Again, if you're listening on the podcast, make sure you check out the video.

I think it'll be really helpful. Um, and as always, thanks so much for watching. Thanks so much for listening. We'll catch you next time.