Buying a funeral home isn’t just a business decision. It’s about your future, legacy, and the families you serve.
But before you sign on the dotted line, you need to make sure you’ve evaluated every lending option available to you.
Choosing the right lender can make all the difference in ensuring you have a smooth, pain-free journey to achieving your goals.
If you’re looking to purchase a funeral home, there are many lending options available.
One of the most popular choices is a Small Business Administration (SBA) loan. While SBA loans may be a common funeral home-lending option, it’s important for you to do your research to guarantee that it’s the right decision for you and your business.
Let’s explore a little more about what an SBA loan is and how it can affect your business.
What are SBA loans?
The SBA provides government-backed loans that are less risky for lenders to offer, which is why most banks and traditional lenders suggest SBA loans for many funeral home clients.
Here are a few more reasons why banks and traditional lenders offer SBA loans:
- Larger lender profits through fees and secondary market sales
- Broader customer reach for lenders, including niche businesses like funeral homes
- Greater Community Reinvestment Act (CRA) credit for lenders who support small businesses
On the surface, SBA loans can seem like a convenient option.
But it’s important to understand how these loans work before deciding if they’re the right fit for you.
Here are 4 realities of using an SBA loan and the possible outcomes you could experience.
1. Approval times
When you’re applying for a loan, time is of the essence. And waiting months for a loan to close can put a hold on your plans and business decisions.
Most SBA loans take 3-6 months to gain full approval and close.
SBA loans can also require extensive paperwork, third-party approvals, and more, making even longer timelines possible for your funeral home.
Other lending options offer a close rate in a fraction of that time, sometimes even in as little as 30 days, ensuring your goals are never at risk.
“Using other lending services was a headache and extremely time-consuming. We used a couple of SBA lenders, but the process and the underwriting became painstaking to close the deal. They were always slow to respond to my needs. It was almost like they wanted to keep my business from growing. I feel like I wasted years using those lending services.”
– John Yopp, Funeral Home Owner
Atlanta, Georgia
>>> Read more about John’s experience here!
2. Origination fees
No matter what your business model looks like, you likely have tight margins and high operational costs to manage.
And the last thing you need to worry about is how to pay your loan’s additional fees.
SBA loans often come with origination fees just to begin the loan process.
These fees can add up significantly over the life of your loan and negatively affect your funeral home’s financials.
There are alternative lending options that offer loans with zero origination or additional fees.
These loans can help you better protect your business’s cash flow by offering clear, predictable terms that can help you move forward confidently.
“Without FDL’s lending service, we would have grown slower, the process would have been more difficult, and the expenses would have been much higher. None of those outcomes are great, and dealing with all three would have been challenging for our business and damaging to our goals.”
– Robbie Hulme, CEO and Founder of Impact Funeral Partners
Lehi, Utah
>>> Learn how Robbie found a better lending option here!
3. Loan-to-Value (LTV) Ratios
When exploring your lending options, you need a lender who can offer a loan that protects your time and cash flow and gets you the full loan amount you need to make your dreams come true.
A typical SBA loan may cover 75-80% of the total amount you need. While that may sound good, that still means you would be required to fund the remaining 20-25% yourself.
This can be a significant hurdle, especially when you’re already working hard to keep your cash flow moving in the right direction.
However, other lenders, depending on your situation, may offer an LTV rate of up to 90%.
The closer you can get to fully funding your goals, the less out-of-pocket expenses will be required of you.
A lender that can offer you a loan with a higher LTV ratio can help secure the funds you need and require a down payment that doesn’t set you back.
“I tried to work with some local banks in our area, but I couldn’t get the full loan amount needed to acquire the facility. All of the traditional lending options capped out at a very low amount, and they didn’t consider the business’s value as a whole. They could only consider tangible assets, such as real estate. Unfortunately, I couldn’t go any further with them”
– Chris Ray, Owner & Funeral Director at Oliver Funeral Home of Eupora
Eupora, Mississippi
>>> See how Chris found a lender who helped him get funded here!
4. Funeral experience
There’s one question you really need to consider before choosing a lending partner:
Does this lender know the funeral profession, my business, and my goals?
The truth is, many traditional banks and lenders don’t have the necessary expertise about the funeral profession to help you on a deep level.
That’s why most of these lenders offer SBA loans to funeral homes that don’t really set you up for long-term success.
This can leave you with setbacks, frustration, and even risk achieving your dream.
When you’re exploring your lending options, find a lending partner who knows you and your business. Using a lender who understands the funeral profession can make all the difference and can provide solutions tailored to your specific needs and goals.
“Working with banks, credit unions, or other typical lenders is a different experience than working with someone who knows your business. With someone like FDL who knows the funeral profession, you don’t have to spend time explaining the details of your business. And because they understand your business, they can usually help you more than a traditional lender. It’s a much more enjoyable lending process with someone who knows funeral homes.”
– Robbie Hulme, CEO and Founder of Impact Funeral Partners
Lehi, Utah
Choose a loan that works for you.
Not against you.
Purchasing a funeral home is a significant milestone, and selecting the right lender is crucial for your success.
While getting an SBA loan from a traditional lender may seem like the easiest route, be sure to consider all your options before you commit to one.
After all, you deserve a lender who can protect your time and cash flow – and possesses an expert understanding of the funeral profession.
A lender like our team at Funeral Directors Life!
At Funeral Directors Life (FDL), we offer loans exclusively to funeral homes. With more than 20 years of experience lending to funeral professionals, we can help you take the next step with clarity and confidence.
“Without FDL, I don’t think I would’ve been able to close the deal on my funeral home. FDL was there to offer me funding, assistance, expertise, and peace of mind.”
– Chris Ray, Owner & Funeral Director at Oliver Funeral Home of Eupora
Eupora, Mississippi
Ready to discover a better lending experience?
Schedule a meeting with our team to learn how we can help you.