Frequently Asked Questions (FAQS)

The addition of a retort or construction of a separate crematory can be financed, often times using existing equity in business assets. If the crematory is part of a debt restructuring package (i.e., refinancing existing debt), it’s likely that no additional equity would be required and that loan closing cost could be included in the combined, new loan.

Experienced lenders recognize that funding a loan for next generation family members (or for key employees) to enable the current owner to phase out of the business or retire is an important part of long term financing. Typically, the current owner(s) is desirous of “cashing out” of the business and wants to be paid not only for real estate, but also for goodwill. SBA loans may be used to fund the sale of business assets and goodwill to a new owner, including to a family member with little or no “cash” equity.

Many times, a funeral service business can be acquired with no, or very little, equity down. Experienced funeral service business lenders are comfortable with the funeral industry and will stretch to minimize the equity needed upfront. If there is a small equity requirement, often the selling business owner will take a seller note back for a small percentage (10%) of the purchase price to facilitate the sale. We can help you understand how this works so that the seller note amount can actually be structured to be considered as “equity” for the new loan. Don’t be deterred if you don’t have a lot of money to put into a good competitor’s location that you would like to purchase.

Many lenders today have come under increased regulatory scrutiny to reduce their portfolio of real estate holdings. When this happens, banks will often use the “balloon” date as an opportunity to ask the borrower to refinance the debt elsewhere. It is not a reflection on your success or payment history, but a statement concerning the lender’s portfolio requirements. Or, some lenders are strictly real estate lenders. If the value of your property, as evidenced by a recent appraisal, has decreased you may be getting pressure to move your loan because your “collateral” package value no longer meets the bank’s requirements. You need to carefully ask a potential lender about their loan to value requirements and whether they will give you credit for the positive intangible assets in your business.

Funeral service financing options for an acquisition or expansion are more available than you might think. This is because an existing funeral home or cemetery has an established customer base and a historical cash flow that can be analyzed. A startup will have a period of negative cash flow before becoming established, which is harder for most lenders to finance. If you are doing a startup, it is critical to find a lender who will help provide the working capital (cash) necessary for the first few months of operation.

Speak with a dedicated member of the Live Oak lending team about the financing options available for your funeral home loan needs.

Most lenders want to see three years of financial statements (usually tax returns) on the business being acquired, three years of personal tax returns, a personal financial statement showing assets and liabilities, a resume and a description of how the loan proceeds will be used (cost breakdown if a construction project). They’ll also ask for copies of leases on the property and current business debt outstanding. A business plan is typically required for a startup. To make an acquisition, you’ll need to provide a copy of the purchase contract. For refinancing we need a copy of the notes you would like to have refinanced.

A funeral home loan can be closed on average within 90 days if all information is available, depending on the time it takes to order appraisals and environmental reports. You may have better luck if you work with a funeral home lender who specializes in loans for funeral service professionals.

A credit score above 700 makes getting a funeral home loan easier. A score below 700 will probably require some explanation if there are negative marks on a credit bureau. Some lenders have minimum acceptable scores, while others such as Live Oak Bank will look beyond a low score to the explanation of how it got that way.

On the front end of any loan application process, you need to take the time to carefully interview the lender asking questions about their internal underwriting/credit criteria. For example, ask about the lender’s loan to value requirements. Ask how “value” is determined. Is it liquidation value or FMV? Ask about cash equity required. Cash requirements don’t necessarily equal the difference between the value of your collateral and the loan you are seeking. Be sure that you understand on the front end of a funeral home loan what will happen in the real estate doesn’t appraise for what you feel it’s worth prior to the appraisal work being completed.