SBA Loans for Funeral Homes: Financing an Existing Funeral Home Purchase
Funeral home acquisitions often involve both an operating business and a specialized building, which can make the total investment substantial. Many buyers consider SBA-backed financing because it can allow longer repayment terms and lower down payments than some conventional loans, and in some cases can finance the business and the real estate together. SBA loans for funeral homes are commonly considered for purchasing existing, operating firms.
This guide explains how SBA financing may be used for funeral home acquisitions, what lenders review and how to prepare. It focuses on buying an existing funeral home, not opening a new one. Eligibility depends on current SBA program requirements, the facts of the transaction and lender review, so confirm current requirements with your lender.
How SBA Lending Works
SBA loans are made by participating lenders and partially guaranteed by the U.S. Small Business Administration. The guarantee reduces the lender’s risk, which can make it possible to finance business acquisitions with longer terms than many conventional business loans. Borrowers must meet the lender’s credit standards and SBA eligibility requirements.
How SBA 7(a) May Be Used
Depending on eligibility and lender approval, SBA 7(a) financing may be considered for:
- Purchasing an existing funeral home, including goodwill, vehicles and equipment acquired with the business
- Purchasing the business together with owner-occupied real estate
- Working capital as part of the acquisition
- Certain closing costs
When real estate is included, see our page on SBA 7(a) business real estate loans and our guide to funeral home real estate.
Licensing and Regulatory Considerations
Lenders generally want assurance that the business will be properly licensed and able to operate after closing. Depending on the jurisdiction, this may involve establishment licensing, licensed funeral directors or managers and approval of ownership changes. Funding may be coordinated with licensing requirements, which vary by jurisdiction. See our guide to funeral home licensing.
Equity Injection and Seller Notes
SBA acquisitions generally require a buyer equity contribution. Depending on current SBA rules and lender policies, a seller note may count toward part of that requirement under certain conditions. Our article on buying a business with 5% down using SBA financing explains how seller notes may be treated, and our guide to funeral home seller financing covers seller notes in funeral home transactions.
What SBA Lenders Look At
- Documented cash flow: tax returns and financial statements that support the price and loan payments
- Service history: records of services performed and revenue by service type over time
- Preneed obligations: what has been committed to families and how it is funded
- Licensing: the path to the business being properly licensed after closing
- Real estate: appraisal and condition, if included
- Buyer experience: funeral service experience or a plan for licensed management
- Credit and liquidity: personal credit history and reserves after closing
- Guarantees and collateral: as required by the lender and program
Preparing Your Request
- A letter of intent or purchase agreement
- Seller tax returns and financial statements for several years
- Service records and revenue by service type
- A summary of preneed contracts and their funding
- Licensing information and your plan for meeting requirements
- Real estate information or the lease
- Your personal financial statement, tax returns and resume
- A business and transition plan
Estimate payments with our SBA loan calculator.
Is SBA Financing the Right Fit?
SBA financing can be a strong option for many funeral home acquisitions, but it is not the only one. Some buyers with strong credit and larger down payments consider conventional financing, and many deals combine bank and seller financing. The right choice depends on the firm, the buyer and the terms available.
US Professional Funding helps buyers evaluate SBA and conventional financing for the acquisition of existing funeral homes. Learn more about our funeral home acquisition financing.
