SBA 7(a) Behavioral Health Feasibility Study

Growing 7(a) lending to behavioral health

From FY2017 through FY2026, 7(a) lenders approved 1,018 behavioral health loans worth $674.5 million. The direction of travel is the clearest signal. Dollar volume bottomed at $31.3 million in FY2019 and the loan count at 60 in FY2020; approvals then rose to 171 loans in FY2025, and FY2026 brought the largest dollar total in the record, $112.2 million on 131 loans. Much of the record is therefore recent, which matters when reading its loss rates: many of the newest behavioral health loans have not yet had time to fail.

The size of 7(a) behavioral health loans

The median 7(a) behavioral health loan is $250,000, and half of these practice loans fall between $60,000 and $683,875. Franchised providers account for 4.0%. Cancellation is moderate, 12.2% at the floor for behavioral health approvals dated FY2017 to FY2024 and 13.5% at the ceiling. On losses, the 354 behavioral health loans funded from FY2017 to FY2021 carry a charge-off floor of 3.1%, and 1.7% failed within five years. The Huntington National Bank holds 84 of these loans worth $14.6 million and Wells Fargo Bank National Association 53 worth $15.5 million, while Celtic Bank Corporation's 42 total $28.5 million; Newtek Bank, National Association and Manufacturers and Traders Trust Company hold 39 each. California leads with 124 loans, then Florida at 80, Minnesota at 69, Ohio at 61 and Texas at 53.

What a 7(a) behavioral health study has to test

When a 7(a) loan buys a behavioral health practice or funds its growth, a feasibility study has to test the practice more than the property. For an acquisition, that means the payer contracts and whether they survive a change of owner, the clinicians who generate the billings and their willingness to stay, and the collections history behind the revenue. For a start-up or new location, demand comes from referral sources, the payer mix in the area and the waitlists at competing providers. Cost includes licensing, credentialing with insurers and the months before claims are paid. Coverage should hold at a lower reimbursement rate and a higher floating rate. The appraisal should separate business value, and the study should show how much of that value depends on people who could leave. One limit: behavioral health and addiction treatment share their codes, and the two cannot be separated in these figures.