A Guide to Funeral Home Business Lending

When considering a funeral home ownership transition, one key factor is how the buyer will finance the acquisition. Unfortunately, for a long time, individuals in this situation have been limited in their loan options, especially for larger acquisitions and financing that goes beyond the real estate component of the business. Fortunately, thanks to a new lending solution, that is no longer the case.

In this guide, we’ll walk you through some loan options that funeral home owners may consider. We’ll also share details about an exciting new program from The Bancorp Bank and Homesteaders Life Company that can help overcome limitations that owners face with some lending options.

Financing a Funeral Home Acquisition

Business acquisitions involve both the assets (primarily real estate) that are part of the business and goodwill. The real estate component is straightforward: The buyer will need funding to acquire the property associated with the business. But what about financing for goodwill?

In a business acquisition, goodwill is the amount paid for a business beyond the value of the real estate. Goodwill includes the other intangible components that make a business successful, such as its brand, reputation in the community, and the relationships it has built. This can comprise a significant part of the value of the business but has historically been more challenging to obtain financing to cover.

Funeral Home Loan Options


Conventional Loans for Funeral Home Businesses

A conventional loan is sought through a financial institution and offers a lump-sum payment of the funds. The borrower will then pay back the loan on the schedule that was agreed upon by both parties. The limitations of most conventional loan programs include that they require a strong and established credit history and often don’t provide financing for the goodwill portion of the business.

Small Business Administration (SBA) Loans for Funeral Home Businesses

Small Business Administration (SBA) loans offer another option for those who do not qualify for or desire a conventional loan. SBA loans offer longer repayment periods and minimize some of the risk for lending institutions since the SBA will pay back the institution for a part of the loan if the borrower defaults. However, a notable limitation of this option is that the maximum loan amount is $5 million, which may be insufficient to cover the business transaction – especially for those looking to purchase multiple funeral home locations at the same time.

Conventional Loans

Small Business Administration (SBA) Loans

Interest rates vary

Relatively low interest rate

Repayment terms vary

Repayment period typically longer

Typically require strong credit

Typically have less stringent credit requirements

Loan amounts vary

Maximum of $5 million (for Standard 7(a))


A New Conventional Loan Solution

Although SBA loans can be an excellent option in some scenarios, they may not meet the needs of those seeking larger transactions due to the limitations of the $5 million cap. In addition, funeral business owners face the challenge of obtaining funding for the goodwill (non-real estate) component of a transaction. That’s why The Bancorp and Homesteaders have collaborated on a new lending program that’s designed specifically for independent funeral homes owners to acquire and refinance multi-unit funeral home businesses.

“Our program with The Bancorp brings together two trusted companies for the benefit of funeral home owners who need more extensive financing for their succession plan or to grow through acquisitions,” said Homesteaders’ Senior VP-Strategic Markets, Will Bischoff.

Who Can Benefit

The program offered by The Bancorp and Homesteaders is ideal for independent funeral home owners seeking loans between $5 million and $20 million. For funeral home owners who are looking to finance larger acquisitions, this provides a solution beyond what an SBA loan can provide.

“This new program changes the game for independent funeral homes that want to expand into multiple locations,” shared The Bancorp’s VP, SBL Business Development Officer, Teresa Carlson.

This option can be used by those who want to:

Acquire a funeral home chain

Buy a funeral home and cemetery combination business

Purchase commercial real estate

Refinance debt

How the Program Works

This new program is a conventional loan, with the key benefit of offering the ability to finance the goodwill portion of the business. Because funeral home owners have had difficulty funding this portion of the transaction, the program offered by The Bancorp and Homesteaders fills a need in the market that allows them to grow their businesses in ways that were not previously possible.

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