5 C’s of Credit | Funeral Home Lending

The changing face of the funeral industry presents both opportunities and challenges to funeral home owners. With cremation rates continuing to rise, funeral home owners are adjusting their typical business models. With aging funeral home owners passing down their businesses, there is a change in ownership to the younger generation. These changes often require financing, whether there is a need to refinance existing debt, acquire another funeral business, finance a succession, expand or remodel.

Regardless of the type of financing needed, a bank or lending institution will be interested in both your business and personal financials. To determine the risk associated with making a loan, a lender will perform a credit analysis.

Credit analysis is governed by the “5 Cs:” credit, character, capacity, collateral, and condition.

• Capacity (Cash flow): The lender wants to know that your business is able to repay the loan. The business should have sufficient cash flow to support its business expenses and debts comfortably while also providing principals’ salaries sufficient to support personal expenses and debts. Examining the payment history of current loans and expenses is an indicator of the borrower’s reliability to make loan payments.

• Capital: Your lender will ask what personal investment you plan to make in the business. Not only does injecting capital decrease the chance of default, but contributing personal assets also indicates that you are willing to take a personal risk for the sake of your business; it shows that you have ‘skin in the game.’

• Character: Lenders need to know the borrower and guarantors are honest and have integrity. Additionally, the lender needs to be confident the applicant has the background, education, industry knowledge and experience required to successfully operate the business. Lending institutions may require a certain amount of management and/or ownership experience. They will also ask about your licensing and whether or not you have a criminal record.

As history is the best predictor of the future, a lender will examine the personal credit of all borrowers and guarantors involved in the loan. Sound business and personal credits are a must. Check both reports before calling your lender; if there are any delinquencies, be prepared to explain. The lender may be able to make exceptions for low credit scores.

• Collateral: A lender will consider the value of the business’ assets and the personal assets of the guarantors as a secondary source of repayment. Collateral is an important consideration, but its significance varies depending on the type of loan. A lender will be able to explain the types of collateral needed for your loan.

• Condition: The lender will need to understand the condition of the business, the industry, and the economy, which is why it is important to work with a lender who understands the funeral industry. The lender will want to know if the current conditions of the business will continue, improve or deteriorate. Furthermore, the lender will want to know how the loan proceeds will be used- working capital, renovations, additional equipment, etc.

The five components that make up a credit analysis help the lender understand the owner and the business and determine credit worthiness. By knowing each of the “5 Cs,” you will have a better understanding of what is needed and how to prepare for the loan application process.

3 Tips for Veterinary Construction Financing

At Live Oak Bank, we have the opportunity to finance veterinary construction projects across the country. While some factors are consistent with any industry, veterinary practices have unique requirements and considerations.  Here are 3 tips from our years of experience with veterinary construction projects.


Determine the maximum amount of financing your practice can support

You want your new construction to increase business, not crash your business because you bit off more than it can handle. Instead of first paying an architect to design a spectacular new building only to realize later that the financials of your practice cannot support the associated debt, go into the design and build process understanding what you can afford. You will want to work with a lender with experience in veterinary construction financing. Based on historical financials and the business’s cash flow, the lender will determine what the business can support.

When determining the loan amount, obviously the cost of the design and build are a large portion of the proceeds but don’t forget to include the expense of all soft costs such as appraisal reports, surveys, permits, fees, title, EPA reports, supervision fees, construction interest carry allocation, and working capital. These costs add up and a portion of the loan proceeds will need to be dedicated to these types of expenses. How about funds for new equipment? Is there a feasible contingency fund for unexpected Change Orders? Knowing the maximum amount you qualify for will allow you to plan accordingly.


Select the real estate for your veterinary practice

When selecting a new location for your practice, you will want to stay close to your current client based. Staying within 5 miles of your current location is a good rule of thumb; however, that can vary depending on your located. Don’t be afraid to map out your customer’s zip codes to make sure you are staying in a convenient location.

Once you have identified a lot, make sure it is zoned for a veterinary practice including overnight boarding. A good survey of the lot will help you determine the buildable square footage and setback lines. Also, don’t forget to take a look at what’s around the lot. Are there any environmental concerns due to nearby gas station or repair facilities that may cause issues when the environmental survey is performed?


Determine the team you will need to complete the project

Veterinary practices have unique needs when it comes to the design and build. Few other businesses regularly have their patients using the bathroom on the floors. Engaging an architect, contractor, and lender with experience in veterinary construction is extremely important. The plumbing, HVAC, electrical, and flooring should be specific to the needs of a veterinary hospital. Their prior knowledge of the nuance and specific needs can help prevent errors and costly delays. Experienced team members will guide you in these decisions and help you understand the timeline of your project. Keep in the mind that change orders do happen, and they can be expensive and push back the completion date. By assembling an all-star team up front, you can reduce frustration and make your experience smoother.

​5 Things You Need To Start an Agriculture Loan

Starting The Agriculture Loan Process

Thinking about taking out an agriculture loan to finance your new chicken farm? There are a few things; five to be specific, that you will need to start the process. We specialize in Agriculture construction financing, and our team has over 60 years of experience in this industry. We will work directly with you to fulfill your dreams of starting your own farm in the growing poultry industry.

First, you will need to identify a tract of property that is a suitable to build on. This property must be zoned and comply with local setbacks. Additionally, it can not be located in an environmental sensitive area.

Next, a Letter of Intent from a poultry company. This letter ensures the borrower that the company will place birds in the houses once construction is complete.

Don’t forget about proper permits! Comprehensive Nutrient Management Plan, Stormwater Permit, Erosion Control/Site Plan, CAFO permit (if necessary), and a building permit, to name a few.

Then you will need complete bids for the project—building bid, equipment, and generator bid, excavation and site work bid, etc.

Lastly, contract income and expense projections for the poultry company—typically provided with the letter of intent.

Succession Financing: What’s Required for a Successful Transition

By: The Live Oak Bank Funeral Home Lending Team

With the baby boomer generation approaching retirement, more and more funeral home owners are preparing to transfer their businesses to new leadership. Approximately 2,000-3,000 funeral home owners are looking to affect a sale or succession plan at any given time. This creates tremendous opportunity for the younger generation to become business owners, but proper planning is necessary for a smooth transition. It is imperative for both current and future owners to know what is involved in planning a succession as well as the financing options available.

Many banks do not understand the intricacies of the funeral space or how to structure the loan to best benefit the borrower, making it difficult for the two parties to complete the transition in ownership. Frequently, a seller finances his interest in the business to a family member or long time employee. This does not allow existing equity to be sold for cash, preventing the seller from achieving the liquidity to live out retirement as hoped. However, financing options do exist that will benefit both the current owner and the next generation.

Current Owner

Effectively preparing your business for the next owner will afford you the best possible purchase price. Executing a full succession plan can take several years, so it is important to think about the steps well in advance. During your planning, consider a) organizing financials and other documents, b) identifying and training the future owner, and c) preparing the business physically.

Financial documents will need to be available to the future owner and the lender. Financial statements including tax returns, profit and loss statements, and balance sheets will be necessary for the valuation of the business.

Gather documents in advance to expedite the lending process. Record revenues and costs as well as call volumes and cremation rates. To help the buyer and bank understand the cost of running the business, keep track of one-time expenses or owner related expenses that may not continue under new ownership.

Another key aspect of a succession plan is identifying a replacement to continue the success of the funeral home. It is vital that he or she understands the details of the business, how to run it, and the market it serves. Share financial details and insight with your successor; ensure the future owner has strong relationships with the staff and community. Training your replacement in both the business aspects and daily operations of the funeral home will result in a smooth transition and contribute to his or her success as an owner.

Preparing your funeral home for sale may include physical updates to the facilities and equipment. Improve tangible assets to attract potential owners and increase the value of your business.

Buyer/Future Owner

When purchasing a small business, there are several items to consider: a) trends in the industry and business, b) the financial status of the business in relation to your personal financial needs, and c) what is needed to secure succession financing.

Understanding the current trends in the funeral industry will help prepare you for ownership. How will the rise in cremation rates affect revenue? What are the preferences in your community? From more celebration based services to the use of technology to enable out-of-town friends and family to watch the service, you will want to know what your local market needs.

It is also critical to examine trends within the funeral home. How has call volume changed in recent years? Is the funeral home gaining or losing market share? How have operating margins changed over time?  Will the transition affect trends in staffing?

Before embarking on this business venture, analyze the financial status of the funeral business to make sure it adequately covers both the business and your personal needs. Have a clear understanding of the cost to run the funeral home, including your personal salary. A lender will need to know you are able to support your business and your lifestyle.

For the transition in ownership to occur, you must be able to secure financing. As the future owner, you need to understand the details of the business and how it is operated. You will need to understand the cash flow of the business as well as the value of the real estate and assets you are purchasing. You will also need to gather documents for the bank. Having a team of professionals, including a financial advisor and lawyer, can simplify the process. An advisor will value the business to ensure an accurate value and fair purchase price. The lender will also need to know your personal credit and financial responsibility to assess your ability to repay the loan. In preparation for owning the funeral business, you will need to have a sound business plan. Understanding your market, your market strategy, and the business financials will help you secure financing and execute your business plan.

In the current market, there is great opportunity for current and future funeral home owners to benefit from a well-executed succession plan. Work with a team of professionals who know the funeral industry to achieve a smooth transition and allow the funeral home to continue its legacy and success.


Download a copy of the Live Oak Financial Column. Posted with permission from American Funeral Director.

The Amigos’ F2FEC is Something New

You might say it is a re-imagined industry conference or you simply describe it as bigger, badder, bolder and different than any other amusement industry conference before it. Amigo architects Ben Jones, Rick Iceberg and George Smith believe this new “conference” will make an impact on an entire industry and they hope in the lives of entertainment center operators, manufacturers and suppliers. We sat down with the Amigos on a recent trip to Orlando and discovered three serious guys deeply passionate about the FEC Industry and willing to invest time and money for the shared vision.

Read the full article here: The Amigos’ F2FEC is Something New

Performance Management Webinar

By EASI-Consult

What does it mean to manage performance? In this webinar, we’ll talk about 5 key steps in a Performance Management Cycle and strategies to ensure that your employees are engaged and performing to their fullest potential.

You’ll also learn how to support your employees using simple techniques such as setting effective goals, holding employees accountable, supporting their work-life balance, practicing active listening skills, giving effective feedback, rewarding effective performance and more. Have you ever wondered how to address or reward those groups of employees who exceed, meet, or fall below your expectations?


Download the presentation here.

NCPA Ownership Workshop Scholarship Application

Live Oak Bank, in conjunction with the NCPA Ownership Academy, is proud to announce an Ownership Workshop Scholarship Program. Ownership Workshops are specifically designed for pharmacists considering pharmacy ownership or desiring additional management skills. The Workshop will assist pharmacists in the development of tools that will guide them in pharmacy ownership and enhance their current management skills. According to the NCPA:More than 50 percent of past Workshop participants now own their own pharmacy.

Workshop details:

Date/Time:    May 1 – May 3, 2015
Where:          Las Vegas, NV

Date/Time:    August 21 – August 23, 2015
Where:          Charlotte, NC

Cost:              Live Oak Bank scholarship covers the scholarship for attending the Ownership Workshop at $1,000 per person.  This covers the registration fee, 2 nights lodging, 4 meals, workshop materials, and CE processing. Participant is responsible for travel arrangements and expenses. ***if you need additional hotel reservations you will need to let the NCPA know when you are awarded scholarship.

NCPA Ownership Workshop Live Oak Bank Scholarship Candidate Application

Submit your application to Sarah Carroll at sarah.carroll@liveoakbank.com.

Live Oak Bank Begins Financing in the Wine and Craft Beverages Industry

 Live Oak Bank is excited to announce a new lending division offering financing to the Wine and Craft Beverages industry. After extensive industry research, Live Oak assembled a team of lenders and industry experts to address the need for financing to wineries, vineyards, breweries, distilleries and ancillary businesses in this space. Live Oak can provide funding for acquisitions, successions, partner buy-ins/outs, expansions, operating capital, refinances, loan payoffs and real estate.

The Craft Beverages industry, in particular the wine segment, is banked by an established, industry-specific financial community, but most existing lenders utilize conservative guidelines in their approach to credit.  Live Oak Bank plans to fill a financing gap for those established in the industry that have strong cash flow, but lack appropriate collateral to secure loans with conventional lenders.

“The Wine and Craft Beverages industry is in growth mode, and we’re excited to enable that growth through financing,” said Kay Anderson, General Manager of Emerging Markets at Live Oak Bank. “We will focus on strategic partnerships within the industry and the knowledge of our senior lending team to quickly gain momentum,” Anderson stated.

“I’m thrilled Live Oak is stepping into this space. Having been in the industry for over 20 years, I’ve seen the growth in the demand for lending,” said Jeff Clark, Domain Expert for the Wine and Craft Beverages segment at Live Oak. “Live Oak’s loan structure, cash flow credit orientation, speed and service differentiate us from other lenders in the space, and position us to meet that demand.”

The Live Oak team has extensive lending experience and industry knowledge, enabling them to structure loans designed to meet the unique opportunities facing the Craft Beverages industry. Live Oak is designated as a preferred lender by the Small Business Administration (SBA). This designation allows the bank to make loan decisions at a more efficient and faster pace, leading to quicker access to the necessary funding. Like all of their industry commitments, Live Oak Bank is invested in becoming a leader in financing this space.

Live Oak Bank supports another La Cima World Missions trip

With a team of three, Dave Sperows team brings relief to people in Erbil, Kurdistan, Iraq

Wednesday, January 7, 2015 – Wilmington, NC – For the past three years, Live Oak Bank has donated to the worldwide humanitarian efforts completed by La Cima World Missions. The founder, Dave Sperow, and the other two members of his team returned to the United States on January 1st after a 13-day mission trip to Erbil, Kurdistan, Iraq.

Side-by-side with physicians and other healthcare providers from the Kurdish Children’s Hospital in Erbil, they worked tirelessly in refugee/Internally Displaced People (IDP) camps. The goals of this mission were multi-faceted. Beyond providing dental care, the team also raised money to purchase clothes, food, medicine, blankets, boots, fuel and fire extinguishers.

The IDPs are mostly Christian, Yazidi and other religious minorities who have been forced from their homes by intense persecution from ISIS. Most of these people have had to run with only the clothes on their backs, and many of them have had family members murdered or enslaved by ISIS. They have been surviving by living in any available shelter. Parking garages and abandoned buildings have been converted into makeshift indoor tent-cities. Others are living in actual tents that have been put up in various camps around Erbil.

As winter closes in, it has begun to rain and it is getting cold. Many people are at great risk due to the deteriorating weather conditions. When they were forced to flee, it was a hundred degrees and they had no winter clothing. Now they are woefully unprepared to deal with the elements. Rubber boots were purchased to replace sandals and warm weather footwear that are useless in the mud that now makes up the surroundings in the tent cities.

One of the problems with the cold weather and tent cities is that they are forced to use kerosene heaters to try to stay warm. Over the months,these folks have accumulated a wide variety of items that they cram into their tents. This turns into a very densely packed tent in which most of the goods are flammable. It is not uncommon for kerosene heaters to be tipped over and set a tent on fire. These blazes spread quickly and in tent cities, they kill fast. By providing fire extinguishers, they can be strategically and safely placed in the camps.

“Live Oak Bank is proud to support another worthwhile cause through La Cima World Missions,” commented JP Blevins, General Manager of Live Oak Bank’s healthcare division. “It says a lot about Dr. Sperow and his team that they are willing to spend their holidays in remote, impoverished parts of the world using their skills to provide dental and medical services to those in need.”

“This mission never would’ve been possible without Live Oak Bank making the initial donation, kicking off our fundraising efforts for our trip to Iraq,” expressed Dave Sperow. “We raised and spent nearly $70,000 on aid for the IDP’s. In all of my years of being involved in humanitarian outreach, this was one of the most tragic situations I have ever experienced. I am so grateful that we were able to bring a bit of comfort and a couple of week’s worth of food to these people.”

Why Now Is A Great Time To Build Your Dental Practice

If you’ve been thinking about building your own dental practice, now’s a great time to jump in.  Market conditions continue to support favorable mortgage rates and construction costs. In addition, owning your commercial property still appears to be a reliable and potentially profitable investment for your future.

Favorable commercial property values

Commercial property values are at their lowest level in decades, providing purchasers an opportunity to obtain far more for their investment than they could have just a few years ago. Plus, property values are likely to increase over time as the economy recovers, making commercial real estate a relatively secure long-term investment. Commercial property can also become a potentially valuable source of retirement revenue – either through outright sale of your practice and the underlying property, or through sale of your practice and lease of the property, creating a life-long revenue stream.

Historically low mortgage rates

As with residential properties, commercial real estate mortgages continue to be at historically low levels. Today it is possible to secure long-term commercial mortgage payments that rival the rental payments for a comparable leased space. In addition, down payments for financing can be as low as 10% of the total loan amount if financing is obtained through an SBA program.

Stable construction costs

Costs for construction materials like plywood, copper, and diesel fuel have climbed during the “Great Recession,” jumping 5.4 percent during 2010.*  Nevertheless, construction companies are still holding the line on bid prices due to intense competition and weak demand for their services.  As demand for commercial building construction increases with a recovering economy, expect construction costs to increase as well. Now is an excellent time to build your own practice, while the costs of building remain relatively stable.

So if you’re considering building your own practice, don’t wait.  Current market conditions have created an unprecedented opportunity to invest in your future at historically low costs. But the opportunity won’t last forever.

*Modern Distribution Management, “Construction Firms Face higher Materials Costs, Flat Building Prices,” www.mdm.com, January 13, 2011.