Funeral Home Loan Application Process
What are the Steps in a Funeral Home Loan Application Process?
Death is the only certainty in life, and when that time comes, families need a space to mourn the loss of their loved one. For the entrepreneurial mind, owning a funeral home may have crossed your mind as an opportunity to get into a “recession-proof” business.
Starting a funeral home from scratch is expensive. If you are entering the market to acquire an already-established funeral home business, then you will need to find a specialized loan to help you purchase the business.
The experts at BSF understand that this can be confusing for a new buyer, so we have put together a step-by-step list of the typical steps in a funeral home loan application process to help guide you:
Are You in the Market for a Funeral Home Loan?
As a prospective funeral director, you need to decide what type of loan you are in the market for. Are you trying to acquire a loan to start your own funeral home from the ground up, or are you looking to acquire a pre-existing business?
Of course, money isn’t the only reason to go into the funeral home business. (1) Most funeral directors find personal satisfaction in helping families ease into their new life without a loved one, and helping them focus on mourning, rather than the logistical stresses of arranging a funeral.
““You guys are like family to us” means a lot to me. It’s important to know that what you’re doing is meaningful for the person you’re doing it for.”
– Caleb Wilde, 10 Reasons I’m a Funeral Director
Acquiring a business is generally the best way to go to enter the market, buy out competition or expand your current practice.
An established home has a historical record of its clientele, profits, demographics and popular services. Starting a funeral home may have a few years of trial and error before it starts turning a real profit, and you will be putting your personal money into the home’s success, rather than the bank’s assets and backing. With a bank behind you, your financial safety net is larger. That peace of mind can increase your odds of success and encourage innovation.
For this reason, many funeral directors choose to go through the bank to acquire an established funeral home, rather than put their personal finances at risk.
You will typically want to find a seller while you are working on acquiring a funeral home loan so that the total timeline is shortened. Some funeral home lenders, depending on your history with the lender, may not extend a loan unless you have a seller in mind. There may be required paperwork from the seller to even begin the application process.
Once you have made the offer, the funeral home loan application process can begin.
The Funeral Home Loan Process
- Developing a Plan In this initial stage, you will need to think about how you will run a funeral home once you purchase it. This is important information for your loan application process, as will help the lending agency determine if your business plan can hold up under the pressures of an economy that is always in flux
It will also help you strategize with your agent and determine where any revenue breakdowns are, how to fix them, and how they hold up against predicted market trends.
- The Application In this application phase, your lending agency will help you gather all the information you need to pre-qualify your loan. You will need to discuss your business plan with the loan officer, including any services you plan to provide, methods for preventing revenue loss, and where you plan to bring in revenue through the business.
You will need other items to prove you are financially responsible, such as previous tax returns, contact information, resume, and other personal financial records.
“many funeral directors choose to go through the bank to acquire an established funeral home, rather than put their personal finances at risk.”Keep in mind what line of credit you are requesting in the application process. If you are putting your personal assets on the loan for collateral, remember that this is a form of personal wealth, and puts the assets at risk.
If you currently own another funeral home, you may also need to provide proof that the funeral home you own is stable by providing corporate tax returns, call volume logs or profit sheets. The upside to this is that you can put any assets from the previous home on the loan instead of personal assets, and your loan application process will significantly shorten.
Once this process is complete, you will receive a loan proposal, which will tell you the credit your agency is willing to extend to you based on the documents provided.
- The Underwriting During the underwriting process, you work closely with the underwriter to verify and analyze the documents you have submitted during the application process. This helps the lending agency verify the amount of credit they have offered in the proposal. Many new funeral home buyers can receive 100% coverage of the purchase cost if their previous history is clear and they choose a reputable funeral home lender.
If you have questions about the contract, your underwriter is an excellent resource to have any questions clarified. They specialize in the finer points of the contract and can give you the clearest view of what your agreement is, in plain-speak, if needed.
- The Closing Once the lending agency has negotiated a deal with you, and you know how much of your purchase will be covered, you need to have a final meeting with the agency to review and sign several papers to finalize the deal. You may need to schedule a consultation to go over every part of this paperwork in detail, verifying the contents of the security agreement, loan terms, deed of trust, and other documents that may be critical in the success of your loan.
How Soon Before Closing is a Loan Approved?
Overall, the typical funeral home loan application process takes 30 days from when your initial application is submitted.
The process can be much slower, or faster, depending on the materials necessary, whether you have already found a seller, or if there are any discrepancies in the documentation provided to the bank.
One of the most common reasons an application may slow down is that the bank needs additional documentation to prove that certain transactions have occurred in a previous business, or they may need more information from the prospective seller. If this is the case, your loan advisor will contact you to request the necessary documents.
A prompt response is best, but any missing details may further delay the process, so it is always advised to review the documents with a professional funeral home advisor or lender before submitting any new documents.
If you have clear documentation and provide more than the bank requires for the application process, you may see the loan approved from application to underwriting and closing in less than 30 days. While this is more common for funeral directors who have previously owned one or more funeral homes and maintained a proven track record of success, it is still possible for a new and unproven funeral director.
Funeral Home Business Loans with BSF
The U.S. Small Business Administration has acknowledged that lender relations specialists can help keep funeral home loans and deals running. (2)
For your next (or first) funeral home loan application process, put your trust in BSF, the leading funeral home lending service connecting buyers to sellers and other resources in your area. BSF specializes in funeral home financing and maintains a track record of success with up to 100% financing available. BSF will help connect you to sellers in your local area, make the funeral home loan application process seamless, and maintain confidentiality.
- Huffington Post https://www.huffpost.com/entry/funeral-director_b_4911943
- Small Business Administration https://www.sba.gov/offices/district/ne/omaha/success-stories/lender-relations-specialists-help-keep-funeral-home-deal-alive