Business Loans for Behavioral Health and Substance Abuse Facilities

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It’s no secret that two of the biggest health crises facing the public today are those of mental health care and addiction to opioids. According to survey results from the CDC, over 12% of American adults are currently using medication to control feelings of anxiety alone. CDC also reports that opioid-related overdose deaths have been increasing year-over-year since 1999.

On top of that, the ongoing pandemic has shown us that healthcare is an even more vital system than we previously realized. Even if your facility isn’t meant to treat the coronavirus, providing additional care to the people in your community is a massive help in a difficult world.

Starting a treatment facility for either or both of these issues is a noble way for an entrepreneur to help their community. The problem is, compared to a business like a bakery or a yoga studio, there’s a significant amount of upfront costs, red tape, and background work to be done before you can open the doors and help patients seek recovery.

The Costs of Opening a Treatment Facility

Before you even consider which types of loan you may want to seek out, you’re going to need to put in some groundwork to understand your exact goals and plans as a health provider. 

A health center like a mental illness or substance abuse facility isn’t going to operate like a normal business. Healthcare providers have a much more robust series of licensures, certifications, and accreditations than other businesses will. So understanding your goals and conducting a feasibility study will be key.


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As for goals, ask yourself what you’d specifically like to be treating and how you’re going to treat it. Are you going to focus on mental health? Substance abuse disorders?

What sort of treatment services do you plan to offer? Are you looking to provide largely outpatient therapies? Inpatient therapies? Residential treatment? Do you want to provide sober housing for people seeking substance abuse treatment? 

Knowing exactly what and how you plan to offer treatment is a vital step for all treatment centers. Only once you’ve got your targets selected can you move to the next step.

Feasibility Studies

Feasibility studies help you understand exactly how much money you’ll need to start your facility because they help you understand what’s needed on the ground.

The study will help you understand a few important factors: how saturated the current market is, how significant the problems are in your market, and more. You don’t want to build a 500-bed behavioral health services facility if your feasibility study shows you that your area has several other similar facilities that are already not filling every bed. Substance use disorder treatment is a helpful and valid pursuit, but the size of the facility and type of treatment offered should be catered to the types and levels of drug use in the area.

Furthermore, understanding the market will help you plan every other step of the way: how much real estate is needed? How big of a staff? If you’re offering inpatient drug abuse treatment, you’ll need not only the therapists and other medical staff, but also food-service workers, management, custodial staff, executives, intake workers, and more. A small outpatient facility will need much less real estate than an inpatient facility with space for patients to move around, visit family members, eat, or exercise.

There’s also a marketing budget to consider. Properly marketing your new facility can run up costs in the mid-five-figures. Unfortunately, even helping people get well is a business, and you can’t offer treatment if you aren’t generating revenue.

Understanding what your market warrants will help you plan on staffing and real estate budgets, which will inform exactly how you go about seeking funding.

The Best Types of Loans for Behavioral Health and Substance Abuse Facilities

Traditional Loans

Traditional loans are given out by financial institutions and are exactly what you think of when you picture a loan. The financial institution evaluates the potential borrower’s merits as a borrower: their credit history (business and/or personal), their business plan, their industry, their assets, and the size of the requested loan. If approved, the borrower will make monthly payments on the principal and interest until the loan is repaid. 

Lenders can be cautious about the companies to whom they are lending money. a public health facility offering support services for people in need is a noble business venture, but the banks are still going to make their lending choices based on the probability of getting repaid with interest. This is why it’s so key to have your ducks in a row when it comes to your plan and your feasibility study. You need to prove to the lender that a loan for your company is very likely to be repaid.

SBA Loans

For a well-qualified borrower, SBA loans will likely be your best option. The United States Small Business Administration (SBA) provides backing to financial institutions. Look at these loans as traditional loans which are less risky for the financial institution. In a traditional loan, if the borrower defaults, the bank is liable to lose a considerable amount of money. With an SBA loan, the federal government guarantees the loan, so if the borrower defaults, the bank with face minimal loss.

There are massive upsides to SBA loans for mental health treatment or substance abuse treatment providers. For starters, there’s a wide swath of expenses you can pay for with SBA loan money. You can make numerous hires, purchase real estate, buy new or upgrade various equipment, renovate a building, acquire another practice, or refinance existing debt. SBA loans can also be huge, as large as $5 million. 

However, because the loans are guaranteed by taxpayer money, only well-qualified borrowers need to apply. You’ll need to provide a ton of paperwork: your facility’s financial statements, licensing, previous loan applications, tax returns, resumes, and more. 

If you’re looking to start a mental health or addiction treatment center from the ground up, SBA loans likely won’t be particularly helpful given the eligibility requirement of several years of financial data. However, if you’re looking to expand, acquire, or upgrade your existing services, they’re a great place to look.

Business Lines of Credit

Business lines of credit function like a business credit card. You’ll receive a pre-set borrowing limit from a financial institution, you’ll withdraw as needed, and then you’ll pay interest only on what was borrowed. 

If you take out a business line of credit for some technological upgrades at your facility, you might have a pre-set limit of $100,000. When you go to purchase that new equipment, it might cost much less – say, $28,000. If you were loaned that first hundred thousand, you’d be paying interest on the whole amount. But because you withdrew for the purchase from a business line of credit, you’ll only pay interest on the $28,000.

Equipment Loans

If your treatment center is looking to perform the medication-assisted treatment or have some other inpatient treatment for drug addiction or mental illness, you’ll likely need to purchase or lease some very expensive equipment for medication storage, testing, or diagnosis. On top of that, an inpatient treatment center will require food and beverage making and storage equipment. And health information storage and case management will require computers. At the very least. All this is to say, there’s likely to be a ton of stuff you’ll need to purchase. 

Equipment loans are designed for precisely this purpose. In an equipment loan, the lender will hold the new equipment as collateral. That is to say, if the borrower defaults on the loan, the lender can repossess the equipment in question and minimize financial risk. 

If the primary need for funding for your behavioral health or substance abuse facility loan is some sort of equipment, and not wages or real estate or some other expense, equipment loans are likely to be a great bet.


Because of the public safety aspect of treatment centers like we’re discussing here, local government, state government, federal government agencies, and even some nonprofits and private business entities often offer significant grant money to help these businesses treat people in need.

The federal government helps here too. The Substance Abuse and Mental Health Services Administration (SAMHSA) is an agency within the U.S. Department of Health and Human Services dedicated to assisting just such treatment facilities as discussed here.

The agency’s website contains many resources for facility owners and managers, but importantly does a great job of providing a one-stop-shop for facilities in search of grant funding. The site contains a page dedicated to listing the various grant programs available, along with due dates and other helpful information, including contact information for the entities offering the grant and other technical assistance.

Treatment programs for mental health disorders and substance use disorders are key parts of public health.

Starting, acquiring, or expanding a facility for these programs is a massively helpful pursuit, whether you’re looking to help those with alcoholism, a mental health struggle, or addiction to a substance. If you’re considering such a business move, be sure to understand the market for such a facility in your area, know how you plan to market and treat your patients and make the best possible choices for financing a very expensive and complicated path for your company.