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Is he still licking at the lump now?
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All right! So, since he has stopped licking at the lump, I do think it is reasonable to go forward with the punch biopsy alone. Of course, if we diagnose a malignant tumor, we will recommend a second surgery to remove the entire growth (and likely amputate the toe). As long as you aren't concerned about a second episode of anesthesia or the cost, I think a punch bx is a great option here.
To answer your questions, I expect that a small punch would heal within the typical 10-14 day time period. Paws can be somewhat unpredictable though - because of the weight bearing, it can be a slower healing time. Also, if he manages to lick the incision site, this could also dramatically slow healing.
With regard to sedation vs full anesthesia - this is going to be up to the discretion of the vet performing the procedure. I personally would feel comfortable doing a quick punch with sedation alone.