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The death care industry offers a lot of opportunities for small business owners in the United States. There are more than 19,000 funeral homes in the country and the death care industry is worth over $20 billion. Nearly 89% of the entire market is accounted for by small and private companies. In the absence of a major player in the industry, small business owners have a better shot at creating a profitable funeral home business. The death care industry continues to see an increase in revenues due to the rising costs of funerals in the country.
Funeral home financing is the biggest challenge that business owners face when entering the industry. Whether they’re buying an existing funeral home or setting up a new one, the possibility of success is closely tied to their ability to raise the required funds. That can be easier said than done, particularly because funeral home financing can be difficult to obtain from conventional banks and lenders.
Benefits of owning a funeral home business
An aging population and declining mortality rates ensure a steady stream of income for funeral homes. Even as burial rates are expected to decline over the next decade while cremation rates go up, many families still prefer having traditional funerals that may include embalming and the use of a casket for viewing.
Funeral homes provide a variety of services to suit the preferences of their clients and additional services mean more revenue. Most funeral homes offer services that include dressing, casketing, embalming and even catering. To cater to the rising rate of cremations, almost 30% of all funeral homes in the US now have a crematory and almost all others are planning to open a crematory in the coming years as this will evolve into a revenue stream in its own right.
How to secure funeral home financing
New business owners thinking about buying an existing funeral home might face some difficulties in getting a loan to buy a funeral home. Generational loyalty is an important measure of success in this industry and that doesn’t exist for someone who’s only just venturing into the funeral home business. Banks view this inexperience as high risk and may turn down applications for funeral home financing.
Those who are already in the business may find it not as difficult to raise the required funds, but the terms and conditions can often make the loan prohibitively expensive, thus making it impossible for business owners to expand their existing locations or open new locations unless they’re able to put up all of the cash themselves. However, SBA funeral home loans can solve these problems for both new and existing funeral home businesses.
SBA Funeral Home Loans
The new funeral preferences have made it necessary for funeral homes to provide services that clients are looking for. This requires existing business owners to make substantial investments in acquiring new equipment and possibly even additional real estate to expand. New business owners must ensure that their funeral homes provide these services as well and that leads to increased startup costs.
That’s one of the main reasons why small business owners turn to SBA loans for funeral home financing. These loan options appear attractive due to the lower interest rates and longer repayment terms. Business owners are required to put up less down payment compared to conventional small business loans.
The process to obtain SBA funeral home loans is relatively simpler compared to conventional small business loans. If the eligibility criteria are met, the loans are sanctioned fairly quickly and the terms are also much more favorable. Business owners can take advantage of these loans to start a new funeral home business or buy an existing funeral home.
SBA 7(a) loan for funeral homes
The SBA 7(a) loan is essentially the Small Business Administration’s flagship lending program. The funeral home financing raised through this loan can be utilized for almost all of the expenses that you will incur for your business.
With up to $5 million in financing available, funeral home owners can use these funds to expand their existing property, add a crematorium, purchase new equipment, buy another funeral home and even for refinancing existing debt.
The interest rates tend to be on the lower side when compared to conventional funeral home loans with lenders and borrowers having the flexibility to negotiate on the rate. Typically, it falls between the 4.5 – 5.5% range but could vary depending on the borrower’s profile. Since the interest rate is constant, the payments stay the same for the entire duration of the repayment period which could be up to 25 years.
How to apply for an SBA funeral home loan
SBALenders.com can help you secure the funeral home financing that you seek. We connect business owners to a vast network of nationwide SBA lenders that are committed to quick approvals for borrowers. Here are some of our top lenders for SBA funeral home loans:
| Rank | Bank | City | State | # of Loans | Avg Loan $ | Avg Interest |
|---|---|---|---|---|---|---|
| 1 | Live Oak | Wilmington | NC | 19 | $1,780,526 | 6.3% |
| 2 | United Midwest Savings Bank | De Graff | OH | 16 | $1,931,750 | 7.0% |
| 3 | Grasshopper Bank | New York City | NY | 7 | $1,472,314 | 6.1% |
| 4 | Banco Popular de Puerto Rico | San Juan | PR | 4 | $143,000 | 9.8% |
| 5 | BayFirst National Bank | Saint Petersburg | FL | 4 | $218,750 | 8.4% |