March 14, 2023

Business Loans for Substance Abuse Facilities & Rehabs

The need for substance abuse and rehabilitation facilities is growing rapidly. According to the Substance Abuse and Mental Health Services Administration (SAMHSA), alcohol and drug users report increased use since the 2020 pandemic.

Opening a treatment center allows you to meet these challenges head-on. But first, you’ll need to secure drug rehab business loans. Here’s how.

What Are Rehab Business Loans?

Drug rehab business loans are financing options that can be used for a substance abuse facility or rehabilitation center. These small business loans work the same way as any other business loan, though lenders will base their decisions on the projected profitability of your institution.

To increase your chances of receiving drug rehab business financing, you may need to conduct a feasibility study to assess the needs in your local area. It also helps to put together an addiction treatment center business plan that outlines the scope of your services, as well as your financial projections and funding needs.

How Do Business Loans for Substance Abuse Facilities Work?

Not all loans work the same way. Here are some of the most common types of drug rehab business financing.

Traditional Loans

Traditional loans are often the simplest, though lenders will still need to evaluate your credit history and the information contained in your addiction treatment center business plan. If approved, you’ll repay the loan (with interest) over a predetermined number of years.

SBA Loans

Loans backed by the U.S. Small Business Administration (SBA) have long been the “gold standard” for small business owners. Unfortunately, they may be less than ideal if you’re starting a rehab facility from the ground up, as you’ll have to provide historical data to be eligible. Later on, they can be an excellent financing option for upgrading or expanding your business.

Equipment Loans

Equipment loans are designed to help you purchase the costly equipment that accompanies a drug treatment facility. Typically, the lender will use the equipment itself as collateral, which means that they can repossess the equipment if you fail to make your payments. This lowers the lender’s risk and can also lower your interest payments.

Business Line of Credit

A business line of credit works very much like a consumer credit card. Businesses can borrow money up to a certain amount, then pay interest on the money borrowed. This is a flexible option if you’re uncertain about how much money you actually need.

Are Drug Rehab Centers Profitable?

According to recent estimates, the substance abuse treatment industry is worth $42 billion per year. It’s estimated that the industry will steadily grow, reaching $53 billion by 2025.

The need is fueled by several recent developments:

  • The growing opioid crisis, which has been creeping into small-town America

  • Insurance coverage (including Medicaid) is increasing for SUDs

  • The Affordable Care Act (ACA) allows more patients to be treated

  • The 2020 pandemic has increased the rate of substance abuse

However, some would argue that the revenue projections above may be skewed by predatory treatment facilities. Some rehab centers have used aggressive marketing tactics and demanded large upfront payments, preying on desperate families.

These ethical concerns aside, the need remains high, and rehab centers will continue to play a vital role in improving the nation’s mental and physical health.

Additional Things to Consider

If you’re thinking about starting a drug rehab facility, it’s important to consider additional factors that influence the way your business is run.

How Much Do People Spend in Rehab Facilities?

According to the National Center for Drug Abuse Statistics, the average cost of rehab is $13,475 per person. However, the actual costs depend on the nature of the program (inpatient vs. outpatient) and the type of services. For example, here are the costs of common rehabilitative services:

  • Methadone treatment: $12,183

  • Intensive outpatient: $4,939

  • Adult residential: $9,766

  • Adolescent outpatient: $3,278

  • Therapeutic community: $32,523

Keep in mind that these services are not mutually exclusive. For instance, outpatient services might be paired with therapeutic communities to aid the recovery process, which provides multiple revenue streams in your facility.

How Long Does Rehab Last for Most People?

The length of rehab can vary widely based on the nature of the SUD and treatment. Short-term inpatient treatment can last as little as 3 to 6 weeks, though longer programs last as long as 6 to 12 months.

Methadone — used to treat opioid addiction — requires an average of 87 weeks. Other outpatient services typically last 12 weeks, though therapeutic community services last an average of 33 weeks.

How Many Addicts Fully Recover?

Recovery programs work. A 2020 CDC study found that 75% of those with a SUD eventually recover. That’s good news, though the road to recovery can still be a struggle, and relapse is not uncommon. This only highlights the need for ongoing solutions for those struggling with addiction.

What is the Difference Between a Rehab Center Loan vs a Grant?

Drug rehab business loans come from banks and lending institutions and must be paid back — including interest. Grants, by contrast, come from the government and community organizations and don’t need to be repaid.

But while loans are distributed based on profitability, grants are awarded due to other factors, such as alignment with the organization’s values or mission — which usually makes them harder to get.

Is it Hard to Get Approved for a Treatment Center Loan?

Drug rehab business financing can be harder to obtain than other types of business loans. That’s because most traditional lenders approve loans based on expectations of profitability.

You can improve your chances by crafting a well-written addiction treatment center business plan with clear financial projections. You can also pursue non-bank lenders who specialize in small business funding.

Fora Financial Can Help

Substance abuse and rehabilitation facilities present an opportunity to not only tap into a growing market but also contribute to your community's welfare. To do both, you’ll need the right financing.

Fora Financial can help. Learn more about how we can provide some of the best loans for a new healthcare business. We’ve helped over 35,000 businesses get the funding they need to reach their goals. We can help you reach yours.