According to a June 2017 report by the research company Wonder, there are approximately 73,000 mental health counselors in the U.S. who run their own private practices. This same report indicated that, in 2015, these counselors generated $5.6 billion in revenue. This revenue comprises just part of the thriving American counseling industry, which was projected to reach $19.6 billion in value after growing 4.4% between 2015 and 2020. However, this positive outlook for the counseling industry doesn’t mean that running a private practice is entirely free of challenges.
In the wake of widespread COVID-19 indoor gathering restrictions, many private practice counselors have substantially increased their use of remote appointment technologies, thus often adding additional costs to their operational expenses. Additionally, health insurance premiums are expected to comprise increasingly large amounts of Americans’ income every year, potentially meaning fewer insured people and thus fewer people who can afford counseling.
If any of the above changes have affected your private practice’s bottom line, small business loans for private practice counselors can help you meet your financial goals. Below, learn more about several low-cost funding options.
Some funding challenges you might face as a private practice counselor aren’t entirely unique to the counseling industry. For example, with the ongoing economic crisis, discretionary spending has decreased, thus potentially leading to less revenue for small businesses including private practices. As such, some lenders may decline applications from most private practice applicants. Additionally, lenders may not want to approve small business owners who have only recently started their practices or otherwise lack business ownership experience.
On the other hand, the counseling industry remains uniquely poised to grow despite the economic crisis, thus incentivizing lenders to approve borrowers such as yourself. An August 2020 report found that issues that require mental health counseling and intervention, such as substance abuse have increased substantially during the early months of the pandemic. It’s clear that there’s a great need for mental health counseling services during such unprecedented and stressful times. This report also found that 41% of the survey’s nearly 10,000 respondents said they had experienced at least one adverse mental health condition due to the pandemic.
Private practice counselors are also not limited to in-person visits. The growth of HIPAA-compliant telecommunications allows patients to be seen from anywhere, therefore not affecting a counselor’s ability to bring new patients to their practice.
Given these circumstances, private practice counselors may be facing a favorable market for quite some time. To find out for yourself whether you might be approved for small business loans for private practice counselors, you may want to pursue one of the below types of funding.
Private practice counselors can obtain small business funding from either the SBA or non-government sources. No two funding sources have the same rates and periods, but the below guidelines should give you a general sense of what to expect.
Low-cost SBA 7(a) loans are widely seen as the best funding choice for small business owners, including private practice counselors. SBA 7(a) loans are especially well-regarded due to their low rates, low monthly payments, and long terms. Private practice counselors like yourself can use SBA 7(a) loans to:
Advantages of SBA 7(a) loans for private practice counselors
SBA 7(a) loans are seen as the “gold standard” for small business funding due to their:
Requirements for private practice counselors to apply for SBA 7(a) loans
You and your practice must meet the following requirements to apply for SBA 7(a) loans:
Some lenders may have additional requirements not found with other loan providers. For example, whereas some lenders ask applicants to present their business plans, SmartBiz Loans does not.
Step 1: Verify that you and your practice meet the above SBA 7(a) loan application requirements. To learn more, read the SmartBiz Loans guide to SBA Loan Requirements for Existing Businesses.
Step 2: Gather all your required paperwork and consider having your bookkeeper, accountant, or another financial expert assist you in doing so. Read the SmartBiz Loans Guide to SBA Loans to learn more.
Step 3: Choose your lender based on the lending company’s:
Fees
Your loan will almost certainly include interest fees and repayment fees, but it shouldn’t have many other fees. If you spot excessive extra fees, a different lender may be best. Additionally, you should check that all your loan fees are due during your loan’s lifetime and before your loan’s funding.
Reviews
Find your lender on TrustPilot, Consumer Affairs, and Google to look at their customer reviews. These reviews can tell you whether the lender is a fit for your practice. Make sure to verify that you’re reading reviews by actual borrowers, and look for other private practice counselors among the reviewers – their stories may best explain what you’ll get from your lender.
Obvious loan terms
Any loans you take should have fine print that’s easy to understand. Complicated fine print may obscure unfavorable payment schedules and loan costs, so you shouldn’t hold back from asking potential lenders about their collateral requirements, payment frequency and amounts, total loan amounts, and prepayment penalties. If your lender provides answers that are unclear or unhelpful, you may want to seek funding elsewhere.
Availability
All lenders, even those with obvious loan terms, should make themselves regularly reachable. If your lender doesn’t pair you with a representative whom you can easily reach via email or phone, consider seeking your funds elsewhere. Your representative should also be deeply familiar with your application, the counseling industry, and the unique details of your practice.
Transparency
Make sure that your loan terms include explicit APRs and interest rates. If you don’t see these figures, you may be dealing with a lender unwilling to fully explain your loan terms. As such, your loan provider could potentially obscure provisions that ultimately do your practice more harm than good.
Small businesses such as private practices can use the SBA 504 loan program to obtain money for low-cost modernization or expansion. SBA 504 loan proceeds can go toward opening new locations for your practice, upgrading your equipment, or hiring new employees.
SBA 504 loans can be beneficial if your practice meets the public policy goals of your local community development corporation (CDC). In this case, your SBA 504 loan can cover up to 50% of your project costs, your CDC can cover up to 40%, and you’ll pay for the remainder.
If your practice meets the SBA definition of a very small business (a.k.a. microbusiness), you may qualify for the SBA Microloan Program. SBA microloans never exceed $50,000, and they can go toward all business costs besides debt payments and commercial real estate purchases.
Although SBA loans may be your easiest path toward obtaining small business loans for private practice counselors, you have other options. These alternative funding routes may have higher rates, larger payments, and shorter terms. They include:
Through bank term loans, you can obtain funding with the same rapid speed as through SBA loans, thus making bank term loans a great option for counselors who don’t qualify for SBA loans. Both SBA and bank term loans allow for working capital purchases or debt refinancing, but their prepayment penalties, loan amounts, rates, and repayment terms are likely to differ. Speak with your lender about these loan aspects before committing to anything.
Business lines of credit are loans of a maximum amount that’s proportional to your credit score but typically lower than bank term loan amounts. Business lines of credit also differ from bank term loans in that only the latter stipulates that you use all your funds. In fact, not using all your business credit line funds can be smarter since you’ll only pay interest on the money you actually use.
You can use the money in your business line of credit as often as needed until you hit your maximum. Additionally, business lines of credit may streamline your funding approval since they rarely come with the collateral requirements of other loans. Learn more about business lines of credit through the SmartBiz Loans blog Small Business Lines of Credit Pros and Cons.
Business lines of credit, while similar to business credit cards, are not exactly the same. Although both funding options are revolving lines of credit, only business credit cards can be reused after you use all their funds and repay your loans. Business lines of credit also lack the spending rewards common among business credit cards. Learn more about business credit cards via the SmartBiz Loans blog Finding the Right Credit Card for Your Small Business.
If your company accepts credit or debit card payments, you may be eligible for merchant cash advances (MCAs). Through MCAs, a card provider will lend you money, and you’ll repay your loan by funneling a small portion of all your card transactions to your lender. Alternatively, you can opt for traditional installment-based payment plans.
The convenience of MCAs usually comes with a major catch: extremely high APRs. To learn more about the pros and cons of merchant cash advances, read the SmartBiz Loans blog What You Need to Know About an MCA.
Need funding to rebuild your business? Don’t waste time going from bank-to-bank filling out multiple applications. SmartBiz helps you find the best financing for your unique needs whether that’s an SBA loan, Bank Term loan, or other financing. About 90% of qualified applications we refer to banks are funded and our financial professionals are on hand to answer your questions. Discover if you’re pre-qualified here without impacting your credit scores** and read the SmartBiz 5-star customer service reviews on TrustPilot.