Educational content only. This post explains how financial concepts and published data apply generally to healthcare practices — it does not constitute advice for your specific situation. Consult your accountant, lender, and relevant advisors before making any significant business or financial decisions.
Most clinic operators receive a commercial loan offer and focus on two numbers: the interest rate and the monthly payment. These matter — but a loan offer contains several other terms that affect the total cost of borrowing, the flexibility of the arrangement, and the personal financial exposure involved. Reading the offer completely, before accepting, requires understanding what each term means.
Interest Rate: Fixed vs. Variable
Published lending resources describe commercial business loans as typically offered at either fixed rates (unchanging for the loan term) or variable rates (indexed to a benchmark rate — prime rate in Canada, prime rate or SOFR in the US — plus a spread). Published resources describe fixed rates as providing payment certainty and variable rates as starting lower but exposing the borrower to rate changes over the loan term.
Published resources note that the choice between fixed and variable involves a view on interest rate direction — which is uncertain — and a practical question about cash flow sensitivity. A practice with tight margins may prefer fixed rate certainty; a practice with strong cash flow buffer may be comfortable with variable rate exposure in exchange for a potentially lower starting rate.
Amortisation Period vs. Loan Term
This is one of the most frequently misunderstood aspects of commercial lending. Published lending resources describe two distinct time periods in a commercial loan:
Amortisation period is how long it would take to fully repay the loan at the scheduled payment amount. Published resources describe amortisation periods for business loans as typically 5–25 years depending on the loan type and asset financed.
Loan term is how long the current interest rate and loan conditions apply before the loan comes up for renewal or balloon payment. Published Canadian commercial lending resources describe loan terms as commonly shorter than amortisation periods — a 20-year amortisation with a 5-year term means the loan renews every 5 years at prevailing rates, with the outstanding balance recalculated at each renewal.
The practical implication: a loan with a 20-year amortisation and a 5-year term is not a 20-year loan. After 5 years, the remaining balance comes due unless the loan is renewed. Published resources describe this as a significant planning consideration — particularly if rates have risen materially between the original term and the renewal date.
Prepayment Penalty
Published lending resources describe prepayment penalties as the cost of repaying a loan before the end of its term — through early repayment, refinancing, or a practice sale that triggers loan repayment. Published resources describe two common prepayment penalty structures:
Interest rate differential (IRD): Common in Canadian fixed-rate mortgages and some business loans. The penalty is calculated as the difference between the contracted rate and the current rate for the remaining term, applied to the outstanding balance. In a falling rate environment, IRD penalties can be substantial — sometimes exceeding several months of payments.
Fixed percentage penalty: A stated percentage of the outstanding balance — more common in US commercial lending and some Canadian business loans. Published resources note that fixed percentage penalties are more predictable than IRD penalties but may still represent a significant cost on a large balance.
Published resources consistently describe verifying the prepayment penalty structure before accepting a loan offer as important — particularly for operators who may sell the practice before the loan term ends.
Security and Collateral Requirements
Published lending resources describe commercial loan security as the assets the lender can seize in the event of default. For a clinic loan, security typically includes the financed assets (equipment, leasehold improvements), a general security agreement over all business assets, and the personal guarantee discussed in a separate post. Published resources note that understanding exactly what security is being granted is part of reading a loan offer — the security schedule lists everything pledged.
Covenants
Published commercial lending resources describe loan covenants as conditions the borrower agrees to maintain for the life of the loan — such as minimum DSCR ratios, restrictions on additional debt, requirements to maintain certain insurance coverage, or obligations to provide annual financial statements. Published resources note that covenant breaches can trigger a loan review or acceleration even if payments are current. Reading the covenant schedule in a loan offer is part of understanding what ongoing obligations the loan entails.
→ Related: What a Personal Guarantee Actually Means When You Sign a Clinic Loan
Once you understand the terms in a commercial mortgage offer, the next question is whether buying your clinic space makes financial sense versus continuing to lease. The calculator models the full cost comparison — mortgage payment, ownership costs, maintenance reserve, and the break-even year — using the rate, amortisation period, and term from your actual offer. Separate Canadian and US models with published rate references.
Run the Buy vs. Lease Comparison →Disclaimer: All figures referenced are from published industry sources and represent general patterns — not estimates for any specific practice. KlinDeck is not a financial advisor, accountant, lender, or lawyer. Tools are educational references only. Consult qualified professionals before making significant decisions.