Guides
Funding a new physical therapy business: costs first, then the options
Physical therapy startup costs derived in named variables: one-time outlay, monthly fixed cost, per-visit cost, the collections lag, and the runway they add up to.
What to take away
- This page gives typical 2026 cost ranges for a new physical therapy business, then the arithmetic in named variables, so your own quotes and payer schedules produce your number.
- Startup cost is not one number. It is a one-time outlay plus the months of fixed cost you carry before collections catch up with visits.
- The collections lag is the item most first plans leave out, and it is the reason a fully booked clinic can run out of cash.
- Funding options differ mainly in what they are secured on and how fast they can be drawn. Match the instrument to the gap it is filling.
Typical startup cost ranges
Any single national figure would be wrong for you in both directions. Build-out cost depends on the space you found. Equipment cost depends on the model you chose. Fees depend on the payers you contract with and the cash schedule you set.
Use the ranges below as a starting point, then replace them with your own quotes. Every practice shares the same calculation structure, so that is what follows.
Build-out and fit-out, B: typically $40 to $150 per square foot in most US markets as of 2026. A 2,000 square foot clinic runs $80,000 to $300,000. Plumbing for treatment rooms, a prior medical use, and accessibility work the landlord will not do drive the range.
Equipment, E: typically $30,000 to $120,000. Treatment tables from Chattanooga and Sammons Preston run about $500 to $2,500 each. Biodex and similar brands cover testing and rehab. Buying refurbished instead of new can cut the line by a third.
Deposits and prepaid items, D: typically $5,000 to $20,000. The lease deposit is often one to three months of rent. Professional liability coverage from HPSO or CM&F Group runs about $200 to $600 a year for a solo physical therapist. EMR setup and data migration adds $500 to $3,000.
Professional and regulatory setup, P: typically $2,000 to $8,000. Entity formation costs $100 to $500 by state. Credentialing help costs $100 to $300 per payer, or a service such as Medallion or Modio Health charges a monthly fee. Legal review of the lease runs $1,000 to $3,500, and accounting setup $500 to $2,000.
The variables
Define these from your own quotes and decisions:
Startup cost variables to define
- B: build-out and fit-out of the space
- E: equipment, tables, initial supply stock
- D: deposits and prepaid items
- P: professional and regulatory setup
- F: monthly fixed cost once open
- v: variable cost per visit
- N: visits delivered per month
- r: average collected per visit
- B: build-out and fit-out of the space, including any accessibility work the landlord will not do. Typically $40 to $150 per square foot.
- E: equipment, tables, and the initial supply stock. Typically $30,000 to $120,000.
- D: deposits and prepaid items: lease deposit, utilities, insurance premiums paid up front, software setup. Typically $5,000 to $20,000.
- P: professional and regulatory setup: entity formation, credentialing help, legal review of the lease, accounting setup. Typically $2,000 to $8,000. The IRS starting a business page lists the federal steps; the state fees come from the state, and the licensing questions come from the board, as the licensing and compliance guide lays out.
- F: monthly fixed cost once open: rent, salaries you have committed to, software, insurance, loan payments. A 2,000 square foot clinic with one front desk hire and one treating therapist typically runs $10,000 to $20,000 a month as of 2026.
- v: variable cost per visit: supplies, card fees, any per-claim billing cost. Typically $4 to $12 per visit. Billing services charge 4% to 8% of collections or $3 to $6 per claim.
- N: visits delivered per month, from your capacity grid multiplied by the fill rate you assumed. The startup and market guide explains how to build the grid.
- r: average collected per visit, blended across the payers and cash patients you expect. Use each payer's actual allowed amounts, never a list price. Cash-pay visits run $100 to $200. Medicare allowed amounts are typically $85 to $100 per visit in many markets as of 2026. Commercial payers run $90 to $150. A blended r is typically $90 to $140.
- L: the collections lag in months, from the visit date to the money arriving, weighted by payer. Cash is near zero. Insurance is typically one to three months. A cash practice has L close to zero; an insurance practice does not.
- W: the months before you can bill at all, if credentialing is not complete when you open. Medicare enrollment typically takes three to six months. Commercial payer credentialing typically takes three to nine months.
The derivation
A worked example in variables
One-time outlay: O = B + E + D + P.
From variables to funding need
- One-time outlay: O = B + E + D + P
- Monthly cash out: C = F + (v x N)
- Monthly cash in: I = r x N
- Cash gap: G = C x (W + L) + ramp shortfalls
- Total funding need: R = O + G + reserve
Monthly cash out once open: C = F + (v x N).
Monthly cash in, once collections are flowing: I = r x N.
Collections do not flow from day one. For the first L months, cash in is roughly zero for the insurance share of visits, and for the first W months it is zero for any payer that has not approved you. So the cash gap before break-even is approximately:
G = C x (W + L) + the sum over the ramp months of (C minus I), for as long as I is below C.
The ramp term is the part most owners forget. N starts low and rises as referrals arrive; I lags N by L. Write it out month by month, with N growing on the schedule you believe, and sum the shortfalls.
Total funding need: R = O + G + a reserve you set for the item that goes wrong.
Plug the midpoints of the ranges into the example. B is $120,000, E is $60,000, D is $10,000, and P is $4,000, so O is $194,000. F is $14,000 a month. With v at $6 and N at 250 visits, C is $15,500 a month.
With r at $110, I at full capacity is $27,500, but the ramp delays that. With W at four months and L at two, C times (W + L) is $93,000. Ramp shortfalls for months five through twelve might add $40,000. A $30,000 reserve brings R to about $357,000.
Two observations from the structure:
- The lag term C x (W + L) scales with fixed cost. A lean fixed cost does more for the funding need than any saving on equipment.
- If W is unknown because a payer has not given you a timeline, R is unknown. Get the timeline in writing before you sign the lease.
Where you will enroll with Medicare, the billing and documentation rules that decide whether a claim is paid at all are on the CMS therapy services page; a denied claim does not merely lag, it never arrives.
Cost lines and where they hide
| Line | Belongs in | Commonly missed part |
|---|---|---|
| Rent | F | The months before opening, when it is paid and nothing is billed. Typical small-clinic rent is $20 to $35 per square foot per year, so a 2,000 square foot space is $3,300 to $5,800 a month |
| Salaries | F | The onboarding weeks before a hire treats anyone; the hiring and training guide shows how long that runs. A front desk hire is typically $2,800 to $3,800 a month |
| Documentation time | Reduces N | A therapist doing notes is not delivering a visit |
| No-shows | Reduces N | An unsold slot is fixed cost with no revenue against it |
| Billing | v, or F if salaried | Rework on denied claims |
| Software | D and F | Setup and data migration in D, subscription in F. WebPT runs about $99 to $400 per provider per month; Jane App runs about $54 to $149 per practitioner per month as of 2026 |
| Credentialing | P and W | The fee is small; the wait is the cost |
| Build-out | B | Typically $40 to $150 per square foot; plumbing and prior medical use drive the top of the range |
| Equipment | E | Typically $30,000 to $120,000; tables $500 to $2,500 each |
Funding options by the gap they fill
Instrument
- O, the one-time outlay
- Owner equity, a term loan, an SBA-guaranteed loan
- E specifically
- Equipment financing or lease
- G, the lag and ramp
- A line of credit
- A payer's delay
- Nothing good; the fix is to shorten W
- O and G, larger clinics
- SBA 7(a) loan
- Real estate and heavy equipment
- SBA 504 loan
- Small gaps, thin credit
- SBA Microloan
- Equipment only
- Equipment finance agreement from Ascentium Capital or Balboa Capital
- Working capital, established clinics
- Business line of credit from Live Oak Bank, Wells Fargo Practice Finance or Bank of America Practice Solutions
- Retirement savings
- ROBS through Guidant Financial
- Fast cash, high cost
- Merchant cash advance
- Family and friends
- A written note or a revenue share
Secured on
- O, the one-time outlay
- Equipment, personal guarantee
- E specifically
- The equipment itself
- G, the lag and ramp
- Receivables or a guarantee
- A payer's delay
- Not applicable
- O and G, larger clinics
- Business assets, personal guarantee
- Real estate and heavy equipment
- The property and equipment, with a CDC second lien
- Small gaps, thin credit
- Personal guarantee, no collateral for many borrowers
- Equipment only
- The equipment
- Working capital, established clinics
- Receivables, equipment, personal guarantee
- Retirement savings
- Your 401(k) or IRA rolled into a new C corporation
- Fast cash, high cost
- Future card and claim receipts
- Family and friends
- Nothing formal, or a promissory note
Speed
- O, the one-time outlay
- Slow; weeks to months
- E specifically
- Moderate
- G, the lag and ramp
- Fast to draw once in place
- A payer's delay
- Not applicable
- O and G, larger clinics
- Weeks to months; up to $5 million, terms up to 10 years for working capital and equipment, typically priced at prime plus 2.25 to 3.25 percentage points as of 2026
- Real estate and heavy equipment
- Weeks to months; 10% to 20% down, 20-year terms for real estate
- Small gaps, thin credit
- Weeks; up to $50,000, average around $13,000, rates typically 8% to 13%, terms up to six years. Lenders include Accion Opportunity Fund and Grameen America
- Equipment only
- Days to weeks; rates typically 6% to 12%, terms two to five years
- Working capital, established clinics
- Days to weeks once approved; rates typically prime plus 1% to 5%
- Retirement savings
- Weeks; typically $50,000 and up, with setup fees around $5,000
- Fast cash, high cost
- Days; factor rates typically 1.15 to 1.45, which is expensive for a collections lag
- Family and friends
- Days; terms vary, so put the repayment schedule and interest in writing
The SBA business guide describes the loan programs it guarantees and who is eligible, and it is the right place to read about them rather than a lender's summary. Interest rates, fees and terms are set by the lender and change; obtain them in writing for your own application.
Match the instrument to the gap. A term loan drawn to cover a collections lag is expensive and inflexible; a line of credit used to buy equipment ties up the facility you will need when the lag bites.
Putting it in the plan
The variables above map directly onto the cost and cash timeline sections of the plan; what the business plan must include shows where each one goes, and the opening sequence, stage by stage tells you when each becomes known. Fill the variables as quotes arrive, and record the date on each.
Common questions
What is a reasonable startup budget for a small clinic?
For a lean 2,000 square foot clinic with used equipment, the ranges above put the one-time outlay at roughly $150,000 to $250,000. The funding need, including the lag and a reserve, lands at roughly $300,000 to $450,000 as of 2026.
Fill the variables from your own quotes and you will have a number you can defend to a lender.
Can I reduce the funding need by opening cash-only first?
It shortens W and L, which reduces the lag term directly. It also removes the payer directories as a source of patients, so N may start lower. Model both.
Should equipment be bought or leased?
Leasing moves cost from O into F. That helps the one-time need and hurts the monthly fixed cost that the lag term multiplies. Decide based on which gap is harder for you to fund.
How much reserve is enough?
Enough to survive the one assumption in your register you are least sure of. If that is the credentialing timeline, the reserve is the fixed cost for the extra months it might take.
