Business Loans for Behavioral Services

Small business owners borrow for a variety of reasons – whether it’s because they need to pay their employees but don’t have the cash on hand, or to invest in marketing a new business. Sit down and make a plan for any funds you borrow.

Putting together a complete business plan – from licenses to rent on a daycare center – helps you fully think through your project. You can identify any areas where you might need extra cash. And it can lead to the next question.

When borrowing for a specific purpose it’s important to borrow the full amount. If you run out of funds during renovation, it could delay the opening of your new senior center. Failing to make payroll one week could lead one of your best home aides to look for work elsewhere. 

After you know why you plan on borrowing, add up all your projected expenses to get the total amount to apply for in a loan. Lenders offer loan products with set lending ranges – anywhere from $10,000 to $2 million. If you need a loan for $50,000, spend your time wisely and apply with a lender that you know works in that range. 

A general rule of thumb when borrowing for a small business is that your loan’s term should match how long you’ll receive benefit from the borrowed capital. If you’re taking out a working capital loan to pay rent and utilities for three months, you don’t want to still be making payments on it in two years. 

Banks and traditional lenders prefer to lend for longer periods of time – think several years versus several months. This allows them to maximize their profits. If you only plan on using the funds for a short period, look to an alternative lender to fill your funding needs.

If you don’t have one already, now is the time to put together a budget. Make reasonable predictions about growth in both revenues and expenses, and then calculate a potential loan payment. Can your business’ cash flows extend to make on-time payments?

A loan’s payment consists of interest on the borrowed capital, a portion of the capital, and any fees. If you have a shorter repayment term, you have less time to repay the loan and will have a higher monthly payment. If the predicted loan payment on the capital you plan on borrowing would hurt your business’ cash flows, you have a few choices.

For some businesses, a large, monthly payment can be difficult. This is particularly true if the payment date coincides with another large expense, such as rent. Traditional lenders prefer a one day a month lump sum payment, but alternative lenders offer daily, weekly, and bi-weekly payment options. Consider how this might positively impact your cash flows.

You can also borrow less, which reduces the amount you have to repay and thus your loan’s payment. Take another look at your plans and identify areas where you could scale back. 

Traditional lenders prefer a safe bet – a business that has a long history of success. When you apply for a loan at a bank they could ask to see several years of tax returns and bank statements. Without a long business history, it’s hard to have a loan approved.

Alternative lenders look at other factors when approving loans, however. They will extend credit to a business with just two months of history as long as you have sufficient revenues. 

Credit bureaus calculate a credit score based on your current debt, debt to income ratios, and past payment history. If you’ve declared bankruptcy in the past, made late payments on a credit card, or defaulted on a loan it will drag down your score. Before applying for loans, find out if you have good credit. 

Banks prefer to work with borrowers who have credit scores of 720 and above. Alternative lenders will fund loans for borrowers with scores as low as 530. If you have bad credit, it will impact where you can get funding.