Teresa Carlson, Vice President, Small Business Lending Development Officer
Sustainable business growth costs money. In a dry market, securing capital can be difficult. For funeral home owners, it’s often harder.
Why is this?
To put it plainly, the needs of companies in the funeral industry are difficult to understand when you’re not in the business day-to-day. Most financial institutions that provide business owners with the necessary loans to grow their business can’t speak the language of the funeral home owner. Too often, financing for needs beyond purchasing real estate can be misunderstood, and this is an unfortunate reality that limits the growth of the business.
After working directly with owners for many years, I have seen firsthand the difficulties they go through and how the lack of financing can put their businesses at risk of not obtaining the necessary capital to maintain the business and possibly getting acquired by larger corporations. Their options are limited. For a traditional Small Business Administration loan, while a great option for many (and a product we offer), there is a maximum of $5 million for a standard 7(a) loan. Unfortunately, for a growing funeral business, this is often not enough funding for meaningful growth and completely overlooks the goodwill portion of business transactions in the funeral industry. But the opportunities to expand business are still popping up often; it’s just that the capital to pursue them is not accessible from many lenders. Larger financing options are not only wanted but necessary for independent owner-operators to remain independent.
Understanding how frustrating this can be, the team at The Bancorp sought an opportunity to provide a new alternative to financing in the funeral space. In early 2022, in collaboration with Homesteaders Life Company, The Bancorp Commercial Lending launched the Conventional Loan Program for the funeral industry. Since its launch, the program has found a great niche, even with frequent changes to interest rates. Business owners are coming to an understanding that higher rates may be here for an extended time – and they know they cannot risk passing up opportunities for expansion and growth.
The program provides loans of up to $20 million for large-scale projects, including expansion, acquisition, goodwill, debt refinancing and succession planning. Typically, funeral homes can secure financing for real estate, but funding for the goodwill portion of transactions is rarely considered yet so important in the industry. Through the Conventional Loan Program, we can fund loans up to 85% of the cost of the real estate and 75% of the goodwill with longer terms than typically found in conventional financing and with competitive rates. Having access to this amount of capital, funeral home owners have the funding necessary to support the long-term success of their businesses.
What does this mean for business owners in the industry? First, it’s having the peace of mind that comes with not being limited to a lower amount of funding. Successful businesses can grow and expand in a way that makes sense for their company and have the capital available to do so. Next, it’s remaining independent and having funding available for succession planning to keep the business independent in the future. In a tight-knit industry, this means a lot to owners who are ready to retire but would like to pass the reins to family members or other employees who have grown with the business. Ultimately, the Conventional Loan Program provides the funeral industry with options where choices for growth are often limited.
Please note, that all loan requests are subject to credit underwriting standards by The Bancorp. To learn more about Small Business Lending with The Bancorp and the Convention Loan Program for the funeral industry, click here or contact Teresa at tcarlson@thebancorp.com or 310-902-4050.
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