Acquiring or owning a funeral home is more than just a business opportunity; it is a chance to serve your community in its hardest times. Whether you’re acquiring or growing your business, the right financial resources are key to a successful business.
For some funeral home owners, the lending landscape can seem daunting. Traditional bank loans can require large down payments and may not cover all the costs associated with this industry. This is where Small Business Administration (SBA) loans come in, providing an incredibly flexible form of financing designed to keep small businesses, like funeral homes and cemeteries, going and sustainable.
SBA Loans on Funeral Homes: A More Knowledgeable Approach
SBA loans are government-backed financing options available through preferred lenders like First Financial Bank. The SBA does not lend money to entrepreneurs as such. Instead, they provide a guarantee of a certain percentage of the loan, usually up to 75%, meaning SBA will guarantee a portion of the loan to the bank in the event of default. The guaranteed portion of the loan reduces the lender’s risk and encourages banks like First Financial Bank to offer financial products to these types of businesses.
Benefits of SBA 7(a) Loans for Funeral Homes
The SBA 7(a) loan program is SBA’s flagship lending program and the most popular product for funeral home financing.
Reduced Down Payment Requirements
Lower down payment requirements. The SBA 7(a) loan program typically requires a 10% down payment for acquisitions; if you are expanding your business, the down payment may be lower.
Well-Rounded Financing Cover
Unlike other traditional borrowing programs, where many of the loans available deal only with property and hard assets, SBA 7(a) loans can finance nearly all dimensions of your funeral home business. This broad perspective allows you to source a single loan for multiple needs rather than cobbling together a variety of financing streams for different purposes.
Extended Repayment Terms
SBA 7(a) loans provide some of the longest repayment periods available for business financing. When you factor in real estate, loans can last up to 25 years. This long repayment period allows for reduced monthly payments, which keep cash flow balanced and make it easier to maintain steady cash flow while growing a business.
The extended payment schedule is an added benefit in the funeral business that can be somewhat cyclical: it generates income and helps build a firm clientele over time.
Competitive Interest Rates
The SBA has a cap on interest rates: it enforces fair and reasonable conditions for borrowers.
What Can You Finance with an SBA Loan?
The flexibility of SBA 7(a) loans is also appealing to funeral home owners.
Real Estate: Purchase commercial real estate with the business assets, purchase properties for a new funeral home, or refinance existing property. The ability to finance real estate with favorable terms makes it easier to establish a physical presence in your community.
Equipment & Vehicles: SBA loans can help purchase everything from preparation room equipment and hearses to limousines and the specialized equipment needed to run a full-service funeral home.
Working Capital: Make sure you have enough operating funds to cover expenses in your first years in business or during periods of growth. In that time, it’s important that you continue serving clients, maintain high standards of care, and earn their trust in the community.
Renovations and Improvements: Update facilities as client tastes change, for example, by adding reception areas and viewing rooms, or modern cremation facilities.
Applying for SBA Funeral Home Loan
Though SBA loans are arguably more affordable than many traditional loan types, they have some eligibility criteria. As with all SBA loan applications, you will have to prove the following:
Strong Personal and Business Credit: Lenders generally look for borrowers with strong personal credit scores. Higher scores can improve your chances and may lead to better deal terms.
Relevant Experience: Experience in funeral service or business management demonstrates your ability to manage the business. Most funeral home buyers are licensed funeral directors or have a qualified operator involved in the business.
Good Business Plan: A thorough business plan that demonstrates market analysis and financial forecasts, as well as how you will serve the community, is critical. Your strategy should show that you understand your industry, the funeral service industry, and how you’ll win in your market.
Sufficient Liquidity: Down payments are lower than conventional loans, but they also require assets with adequate liquidity to cover the down payment, closing costs, and operating expenses.
Collateral: To the extent possible, SBA loans need collateral. This usually covers business assets, such as real estate and equipment, and may include personal real estate in certain situations.
The Application Process
Before applying for an SBA loan, you need to prepare thoroughly. However, seeking help from an experienced SBA Preferred Lender, such as First Financial Bank, will significantly streamline the application process. Typically, you’ll need to provide the following:
- Full business plan with financial projections.
- Personal and business financial statements.
- Personal and business tax returns (usually 3 to 5 years).
- Personal and business credit reports.
- Resumes for you and any partners in the business.
- Collateral documentation and appraisals.
- Purchase agreement (if you’re buying an existing business).
- Franchise disclosure documents (if applicable).
As an SBA Preferred Lender, First Financial Bank can help you complete your application faster and offer guidance at every step.
Why First Financial Bank for Funeral Home Financing?
First Financial Bank provides tailored financing solutions. Our clients frequently tell us how crucial it is to work with a lender who understands SBA lending. Whether you’re buying your first funeral home, expanding to more than one, or planning succession, we’re here to give you the knowledge and help make your small business a success.
Take the Next Step
If you want to buy or build a funeral home, an SBA 7(a) loan from First Financial Bank can be the financing option that brings dreams to life. SBA financing also eliminates many of the challenges that kept funeral home ownership at bay by requiring lower down payments, offering comprehensive coverage at competitive rates, and providing longer terms.
As individual consumer preferences change and new options emerge, the funeral service industry is shifting in how we serve our communities. Having access to flexible, affordable financing keeps you agile and ready for the next time you need a way to provide excellent services to families when they are stretched.
Searching for financing alternatives for your program? Contact us to find out more from one of our seasoned SBA loan officers. We are here to help you navigate the lending process and get the financing to build or grow your funeral home business.
We’re in the business of YOU.
