Medical Office and Ambulatory Surgery Center Feasibility Study Case: Lebanon, Tennessee, SBA 504

Feasibility Study Company prepares feasibility studies for owners, developers and their lenders. A study joins a dated market read, a census of competitors, a priced build and a coverage test that shows how much debt a project can carry. This page runs that work on one hypothetical project: a physician-owned ambulatory surgery center (ASC) with a leased medical office wing, financed with an SBA 504 loan in Lebanon, Tennessee. Ask us to run the same work on your site.

The subject is generic: a two-story building of about 22,500 square feet on about 4.0 acres in the South Hartmann Drive medical corridor, with 14,000 square feet for the surgery center (two operating rooms and a procedure room) and 8,500 square feet of office space for outside physician tenants. Every market figure is public and dated. Every model figure is computed by the case engine from the inputs listed near the end, and each input carries a source or the word assumption. The project belongs to our medical office and ASC practice, the town sits in Tennessee at the eastern edge of the Nashville metro, and the program rules are laid out on our SBA 7(a) and 504 page.

Surgical demand follows people, their age, their insurance and the physicians who refer them. The table sets out the public record for each.

A city filling in faster than its county

The city grew far faster than the county around it, 38.8% against 18.5% [1]. The county's gain of 4,693 residents in the year to July 2025 was the third largest numeric gain of any Tennessee county, according to a relocation survey built on Census estimates [5], and county permitting points the same way, with 1,982 residential building permits in 2025 [1]. A surgery center needs the households within a short drive of its corridor, and those are the ones moving in.

Income and age

The county's median household income is far above the city's [1]. The gap implies that households outside the city limits earn more still, and a center in the corridor draws from both groups. Residents 65 and over are 16.2% of the city and 17.0% of the county, below Tennessee's 18.6% [1]. A younger-than-state profile favours work that younger and middle-aged adults need, such as sports injuries, hand and spine surgery, ENT and pain procedures, over a cataract-heavy mix. That will drift as retirement housing fills: the mayor told a local paper that emergency need would climb as residential projects and a major Del Webb retirement community are completed [7]. The research also reports a share of residents under 65 without health insurance, but with no stated vintage, so it is not printed. The payer mix of the trade area is a lender condition.

The hospital and the health economy

Vanderbilt Wilson County Hospital is the area's anchor. The Vanderbilt system took it over on August 1, 2019, when it was licensed for 245 beds on two campuses [10], and it describes itself as the only hospital in the county with a Level III trauma designation [12]. The county's economic development board put its 2017 activity at more than 5,000 admissions, more than 65,000 outpatient visits and nearly 6,700 surgeries [11]. That is old data, but it sets the scale, and the physicians who work at that hospital are the likeliest owners of a competing center. The 2022 Economic Census put the county's health care and social assistance receipts at $559,308,000 [1]. In November 2025 the same system announced a 40-bed inpatient rehabilitation hospital in Lebanon, expected to open in 2028 [9], a sign that it expects growth to continue.

Context from the Census register

The table adds estimates from the Census Bureau and the Bureau of Economic Analysis for Wilson County. They differ slightly from the figures above because they use other vintages.

The register shows a county in which owner-occupied homes outnumber renter-occupied homes by a wide margin, a stable household base [2]. The county business counts are lower bounds, because the Census Bureau withholds some industry cells in small geographies, and the NAICS classes that proxy for medical offices and surgery centers, which fit the asset class only approximately, are counted in the dozens of establishments and the hundreds of employees [3]. That makes it a small local industry, one in which a new entrant is visible.

The subject is a hypothetical site of about 4.0 acres in the South Hartmann Drive medical corridor. Its parcel, zoning district and utility territory are conditions to confirm. The research could not retrieve a parcel identifier, a flood zone, an electric provider or a traffic count, so the paragraphs below describe the rules that would apply and what they would cost.

Zoning, frontage and utilities

The city's office and medical district permits health care facilities and medical services as uses, and its only conditional use is secure personal and group care [23]. The district sheet also sets building height, minimum lot and setback limits that a site plan must meet. Whether a surgery center is permitted by right in the city's residential-professional office districts was not found; a 2021 zoning diagnostic report describes one only as a medium-density residential and professional office zone [24]. The subject therefore needs a written zoning determination for its actual parcel. No traffic count for South Hartmann Drive or nearest interchange was found. A surgery center is an appointment-driven use, but a medical office wing depends on visibility from the road.

The city publishes a water tap schedule by meter size, but the page carries no effective date, so no tap fee is printed [25]. The capacity fees are better documented. In 2022 the city raised its water capacity fee from $350 to $2,500 and its sewer capacity fee from $2,200 to $4,500 per single-family unit, and grandfathering of the old fees was set to end on July 31, 2025 [26]. Those are residential rates; a commercial equivalent was not found. Staff drafted a fee schedule raising building, plumbing, sewer and fixture fees in July 2025, and its adoption was not found [27]. The fees are small beside the site work allowance. The real exposure is a line that does not reach the parcel.

Land

The research records only broker listings for corridor land. A listing's size and price describe one property, and an asking price is not a sale, so the study neither prints nor cites them. The model carries land at a round $400,000 an acre as a planning figure. An appraisal and an executed land contract replace it.

Property tax

Rates changed in 2026. For tax year 2025 the county rate was $1.9089 per $100 of assessed value and the 10th Special School District rate $0.2973 [28]; Lebanon's was $0.6855 [29]. After a reappraisal that raised Wilson County values by an average of 66%, the commission adopted a certified rate of $1.1657 for the budget year beginning July 1, 2026 [30] and moved to a three-year reappraisal cycle [31]. The local paper's estimates for 2026 were $1.1631 for the county, $0.4050 for Lebanon, a combined $1.5681, $1.3417 for the county and the Lebanon Special School District together, and $0.1786 for the school district alone; the final Lebanon rate was not found [31]. The commercial assessment ratio was also not found, so the levy on a commercial parcel cannot be computed. The model uses a planning level of 1.10% of cost, and the actual levy is a lender condition. A Phase I environmental assessment should be ordered before closing on the land, and the flood zone must be read from the FEMA map.

Labor is the largest cost. The model staffs the center with 13 clinical full-time equivalents in the stabilized year at $74,000 each before payroll costs, covering pre-operative and recovery nurses, operating room nurses, surgical technologists and sterile processing. Administration, from a center administrator to a small business office, is a separate allowance of $380,000, and a medical director is paid $60,000 a year. Payroll taxes and benefits add 20.0%. No competitor publishes its staffing and no Tennessee wage series is in the research, so these are planning figures.

Supplies, implants and drugs run at 21.0% of facility revenue and billing at 4.0%. The operating cost base moves from $3,059,680 in Year 1 to $4,348,178 in Year 3, while revenue grows from $2,583,300 to $6,214,200. Staffing leads volume, which is why the first year loses money. Property tax is a planning level of 1.10% of land, building and site cost; the commercial assessment ratio and the adopted city rate were not found and the county reset its rate after the reappraisal [28][29][30][31]. Net operating income is ($476,380) in Year 1, $1,047,022 in Year 2 and $1,866,022 in Year 3, a margin of 30.0% at the plateau.

An SBA 504 project is split three ways. The rules in force from October 1, 2026 (SOP 50 10 8.1 with Technical Policy Updates) set the standard split at Third Party Lender 50%, debenture 40%, borrower 10%; debenture 35% at a 15% contribution and 30% at 20% [35]. The borrower's contribution starts at 10%, rises to 15% for a new business or for limited or special purpose property, and to 20% when the project is both [35]. SBA defines special purpose property as a limited-market property with a unique physical design, special construction materials, or a layout that restricts its utility to the use for which it was built, and its example list names surgery centers and other medical facilities [35]. A newly formed surgery center company is a new business on special purpose property, which puts it in the top tier. The sponsor's 15.0% applies the tier for a new business alone and misses the special purpose test.

At 15.0% the proposal also fails the size test: the debenture would be $6,380,045, above the $5 million limit for a project that is not a small manufacturer [35]. At 43.3% the debenture falls to $1,219,594, under the program limit, and the bank lends $9,101,449, 50.0% of cost. The program offers 10, 20 or 25 years and follows the larger asset class; land, building and site work are the majority of proceeds here, so the model uses a 25-year debenture and a 25-year bank amortization.

The owner-occupancy test shapes the building. For a new building the test is 60% (51% for an existing one) [35]. The model gives the surgery center 14,000 of the 22,500 square feet and leases the other 8,500 to outside tenants, which leaves the operating borrower in about five eighths of its own building. A lender or CDC will want the floor plan and the lease schedule to confirm it.

The debenture rate is 6.97%, the 25-year effective 504 rate from the October 8, 2026 pricing [34]; the actual rate is set when the debenture is sold. The bank rate is an assumption of 7.50%: Prime was 7.00% in the October 9, 2026 H.15 release [37], plus half a point for a start-up surgery center, and SBA caps the third-party spread at 6% over New York Prime [35]. The FY2027 upfront fee of 0.50% on the debenture is added to project cost in the model [36]. SBA's jobs standard is one job per $95,000 of debenture for loans approved on or after October 1, 2025; the proposed debenture is far larger than the restructured one, so the proposal would face a much higher job count. The Mid-Cumberland Area Development Corporation lends across a group of Middle Tennessee counties that includes Wilson [32], and public 504 loan records for the county are a lender condition, because the SBA dataset the research found is not filtered to Wilson County [33].

Whether a feasibility study is needed is decided case by case: 13 CFR 120.160(b): SBA may require professional appraisals, a survey, or a feasibility study [38]. On a ground-up special purpose project with a start-up borrower and a state permit, a lender may ask for one. Our medical office and ASC hub explains the split between a practice valued on cash flow and a medical building valued on net operating income.

The 504 coverage standard is 1.15x, and a new business has no history, so the engine tests the projection in Year 2. As proposed, at 15.0% equity, the project fails all three tests: the contribution is below the tier, the debenture is above the limit, and Year 2 coverage is 0.77x. Coverage is -0.36x in Year 1 and 1.38x at stabilization. The failure does not come from weak demand. It comes from asking a start-up with a long ramp to carry $1,347,901 of debt service from the second year.

As restructured, the engine raises the contribution to the tier and then to the share at which Year 2 coverage meets the floor. At 43.3% equity, debt service falls to $910,265, Year 2 coverage reaches 1.15x and Year 3 reaches 2.04x. The 504 split fixes the bank at half of cost, so extra equity displaces the debenture, the program's longest and cheapest money. The deal clears the floor by a hair in the test year, so a lender should treat it as the upper bound and not a target.

There are three ways to reach such a structure. The sponsor can bring the cash. The sponsor can lease space in an existing building, which removes land and construction from the budget; this case does not model a lease. Or the sponsor can show that cases ramp faster than modelled, through signed physician commitments or the transfer of an existing surgical practice. What does not work is the original request. Contact Feasibility Study Company to test your own surgery center project against the coverage floor before a lender does. We show the lender the work; we do not predict what the lender will decide.

Rows move surgical cases up and down by up to a fifth in every year, and columns move net revenue per case across the range in the headers. The table reads Year 2, the test year, on the restructured loan, and its range runs from -0.11x to 2.63x. The spread is wide because most of the center's cost is fixed in the ramp year: a change in revenue falls almost entirely on income. A one-step shortfall in cases takes Year 2 below the floor, and so does a one-step shortfall in revenue per case; a one-step gain in either clears it. Physician commitments and payer contracts are worth more than the building, and a sponsor should secure them before the loan application.