Funding Roundtable 

By: Lauren Moore


For businesses like funeral homes, funding can be incredibly important. Whether you’re looking for preneed or at-need funding, or taking out a loan to start or expand your business, there are a lot of things to consider. Doug Gober, executive marketing director at Live Oak Bank, and David Mullen, senior vice president of Forethought Financial Group, answer some of our questions about funding for death-care professionals, how to stay on top of your finances and more.


What kind of funding services does your organization provide?

Gober: Live Oak Bank does lending, funding for any capital projects –anything from refinance, to acquisition, to construction of a new location. We do funding of all kinds of things. We don’t do factoring of accounts receivable and small loans, lines of credit, that kind of thing. We do exclusively the large funding required to buy, maintain or refinance a business. Anything a funeral home needs, from a capital standpoint, other than lines of credit and accounts receivable funding.

Mullen: Forethought’s core focus has always been life insurance designed to fund prearranged funerals. We now also offer an annuity product designed for situations in which the consumer is terminally ill. For at-need funding, we offer assignment services through Forethought Capital Funding.


What do you look for when considering whether or not to work with a funeral home?

Gober: We’re looking for two things: the credit worthiness and character of the borrower, and the cash flow of the business. In other words, will the cash flow of the existing business fund the new debt to be incurred? We’re not basing our loan decisions on real estate value or any of the normal, conventional banking methods.

Mullen: We have products and services for every type of firm, from small funeral homes that write exclusively walk-in business to national accounts. In our experience, firms that are truly willing to partner with us to grow their business benefit most from our approach. Our fieldbased business development team works with the firm to develop a sales plan and tactics to meet that plan, Forethought University provides on-site and remote sales training, and the entire team, including account executives from our sales desk, helps the firm execute the plan.


What can funeral home owners do to improve their chances of establishing a relationship with your company?

Gober: The first thing of course is just to call us and make a connection. From there, it’s a matter of collecting data. To do business with us, all you’ve got to do is give us a call, and we’ll collect the information necessary to evaluate what you’re trying to do.

Mullen: Establishing a relationship is the easy part. Any firm can call us to speak with an account executive. However, signing up firms is not our goal. Helping each firm experience greater success and growth is. We hope that the first call is just the beginning of an ongoing conversation. We want to develop the type of collaborative relationship that identifies the needs of the firm and allows us to partner in developing and coordinating a plan to meet them.


What kind of impact has the current economy had on funding?

Mullen: In our experience, the decision to plan and fund a funeral is more of an emotional decision than a financial one. Consumers who do it tend to be motivated by a desire to make a difficult time easier for their loved ones or having recently experienced the stress of planning for someone firsthand. We do not believe that economic factors play as large of a part in the decision to preplan. However, data suggest that economic factors may make customers more budget-conscious, leading to a less expensive level of services planned, including driving more consumers to cremations. In light of these trends, our Forethought University sales training focuses on both increasing the number of contracts that counselors write and increasing the value of each of those contracts.

Gober: From our perspective, it actually has improved it, or it has made it more desirable for us. As the economy has impacted funeral service – and it certainly has – that has forced people to begin to think about their long-term plans. Some providers – some funeral directors and funeral home owners – are not excited about the direction the business is taking, and what’s required to make the business work today. Therefore, that creates an environment of effectively people seeking either ways out or something else to help them move to the next step in their lives. From our perspective, this is a business that is controlled by older people. The average age of an owner in funeral service is fairly old, and if they’re looking to transition either to the next generation in the family, or to the next generation of funeral service like an outside owner who’s a non-family member, we can help expedite that transaction. And the economy has really forced a lot of people to think more specifically about what their next steps are and ask, “Do I really want to continue to do this?” If the answer is no, then what do I do to transition? Does my business have value, do I have something worth transitioning to a new owner, whether it’s a family member or some outside entity?


How can funeral directors protect themselves and their businesses financially?

Mullen: Funeral directors should consider both their short- and long-term needs when choosing a preneed partner. Considering one without the other can backfire. In the short-term, every business needs healthy cash flows, which a robust preneed program can help significantly. The long-term view is too often sacrificed by focusing too heavily on the short-term, though. A long-term view sees the need to grow and develop new tactics for sustainable success, which a true partner can help provide. This kind of balance can only be found in companies that know the funeral business, which is why we are so proud to have been a pioneer in helping funeral homes solidify their business models with preneed insurance sales nearly 30 years ago.

Gober: I would say my gut answer to that is paying attention. It would surprise you, but because funeral directors are service-driven and relationship-driven people, on some occasions, they don’t do a very good job of working the business side of the business. Funeral home owners and funeral directors do a great job of taking care of the funeral buyer, but in some cases they aren’t necessarily taking care of the funeral sellers – themselves. So you have to balance the needs of those two things, and if you do that properly, not only do you offer the best service possible to the consumer, you’re also focusing attention on the needs of the business and the financial needs of your operation. It would stun you, how many calls we get from funeral homes that haven’t done their taxes in the last three years. They’re just not paying attention, they say, “Well, I’ll get to it.” Three years pass, and now they want a loan from us, or from some other financial institution. No financial institution on the planet is going to loan them money without a tax return. I travel around the country quite a bit, and my evaluation of the circumstances is that there’s never been a better time to be in funeral service than right now. There is capital available for those who have a vision.


Posted with permission from American Funeral Director. Download Funding Roundtable