Business Loans for Mental Health Facilities
Despite a long-standing stigma, 76% of Americans now view mental health as equally important as physical health. But according to the National Council for Mental Wellbeing, 74% of Americans do not believe adequate mental health treatment options are available.
While America's mental health crisis is regrettable, it creates an opportunity for those looking to make a difference. Small business loans can help you open a mental health facility and impact your community. Here's how.
What Exactly Are Business Loans for Mental Health Facilities?
Starting a mental health business allows you to meet the needs of your community. But first, you'll have to meet the needs of your business. Business loans can be used to cover common small business start-up costs, including:
Commercial real estate
Office supplies and equipment
Business registration fees
Utilities
Insurance
Payroll
Additionally, mental health practitioners must ensure that they possess the proper licensing and accreditation to practice in their state. This licensing typically requires continuing education, so it's important to have funding to cover these ongoing costs.
How Do Business Loans for Mental Health Facilities Work?
The most common type of business loan for mental health facilities is a traditional loan, also called an installment loan. Once a lender approves you for a loan, you'll receive a lump-sum payment. You'll be required to repay this loan in installments over the course of the loan term, including interest.
Equipment loans are another type of business loan. These loans are reserved for the purchase of specialized equipment.
Lenders can also extend a business line of credit, which works much like a consumer credit card. Business owners can borrow money up to a certain credit limit, but they pay interest only on the money they borrow.
A line of credit can be a flexible financing option if you're unsure of your exact needs, though they tend to have high interest rates and low credit limits. Installment loans are better suited for covering high start-up costs.
Is a Small Business Loan Easy to Acquire?
The small business loan process varies by lender. Traditional lenders typically expect to see the following information:
Personal or business credit history
Business plan
Financial documents
Business history (if applicable)
If you're starting a business from scratch, you may have limited financial history to draw from. But traditional loans are still widely available as long as you can demonstrate that your behavioral health business will be profitable. A feasibility study can augment your business plan, illustrating the needs of your community and your capacity to meet them.
Loans backed by the U.S. Small Business Administration (SBA) are among the most sought-after, though they can be the hardest to get. SBA loans are perhaps better suited for business owners who have been in the industry for at least two years. Until then, you'll need to find a lender who can help you get your mental health facility up and running.
How Can You Craft an Effective Mental Health Program?
Do you have an area of specialty? If so, you may be able to develop a mental health program that addresses a unique niche. For example, adolescents have unique mental health needs. Developing a program that reaches children or their families can help you impact the rising generation as well as distinguish your business from other mental health providers.
If you're not sure where to start, conduct a feasibility study in your community. This type of study will shed light on specific local needs. It will also assess your capacity to meet those needs. By identifying the challenges faced by your neighbors, you'll be better able to provide meaningful mental health and behavioral services.
Additional Things to Consider
When starting any business, it's important to plan effectively. Here are some things to consider before launching a mental health business.
What Is the Largest Funding Source for Mental Health Services?
The federal government is the largest funding source for mental healthcare. Specifically, Medicaid is the largest payer of mental health services, though other sources include the Department of Veterans Affairs and the Indian Health Service. The federal government also provides funding to states through Mental Health Block Grants (MHBGs).
Many clients pay for mental healthcare through their private health insurance providers. In fact, U.S. law requires providers to cover mental health services to the same extent as physical health services, which ensures wider access to behavioral and mental health treatment.
Can You Make Money with a Mental Health Facility?
Historically, the profit margins for the mental health industry have been relatively low. But according to the employment site ZipRecruiter, the average mental health counselor makes $91,966 when working at a private practice.
Americans are placing increasing importance on mental health, with some businesses using it as a vital performance metric. This trend will likely fuel demand for mental health facilities, which may give you an edge.
How Much Does It Cost to Open a Mental Health Clinic?
By some estimates, it costs between $70,000 and $100,000 to open a small medical clinic. This is on par with other types of business ventures, though starting a small business in this field will also require licensing, proper insurance, and funding.
Who Are Mental Health Facilities Intended For?
The nature of your mental health facility depends on the nature of your treatment. At a minimum, your mental health business can simply provide a space for outpatient counseling, group therapy sessions, or play therapy.
More intensive facilities can provide inpatient care, which naturally requires more space, additional staff, and the funding to cover essential equipment.
Consider an Installment Loan
What is the best loan to start a mental health business? Most mental health practitioners will benefit from an installment loan. This traditional financing option provides a lump sum of money up-front that you can use for your business. You'll repay the principal — along with any interest — in monthly installments over the course of your loan.
Interest rates can vary, and even a small difference in interest rates can save you thousands over the life of your loan. Make sure to compare interest rates from at least three lenders to find the best terms.
How Fora Financial Can Help
Mental health has historically been one of the most neglected areas of Americans' well-being. But the tide is starting to change, partly due to entrepreneurs like yourself.
If you're ready to make a difference, Fora Financial is ready to come alongside you. We can provide financing to help you launch your mental health business and start changing lives in your community. Learn more through our website, or apply online today.
