Although funeral homes have been an integral part of society for many years, most people overlook the practical aspects of succession planning and sustainability for this type of business. Fortunately, lenders are taking a proactive stance on financing to encourage private ownership. Whether you are new to this field or looking to expand, here are three things to look for when purchasing a funeral home.
Due to the sensitive nature of the death care industry, your first step to a smooth transition is finding an experienced lender. In the past, there were limited options for buyers, but financial institutions are beginning to recognize the need for a low-risk lending solution. By working with a lender who has a thorough understanding of funeral homes, you can guarantee the best possible arrangement with the seller. For those who genuinely want to preserve the privacy and compassion of this field, it helps to have a knowledgeable advocate who can explain the details.
Once you have settled on a lender, you can determine a price that is agreeable to both parties. This includes tangible and intangible assets along with annual revenues. In some situations, an appraisal might be required to assess the value of the real estate as well. With this information, you can identify potential areas for improvement and make a reasonable offer. For example, the asking price for a facility is often higher when revenues reflect a steady increase over time. A business that is declining, on the other hand, will be much cheaper, allowing you to focus on advertising and promotion.
Finally, be prepared to compare different types of financing for funeral homes. Depending on the terms of the loan, various forms of documentation will also be necessary for a cash flow and personal credit analysis. This protects you and the seller by verifying the value of the property and your ability to successfully carry on the business. If immediate improvements will be needed, provide a business plan to your lender to demonstrate your understanding of the market. While preservation is the main goal, you also need to prove that you can make a profit and handle regular expenses. With a carefully structured loan, you can increase your chances of approval despite your previous level of experience.
In the end, providing funeral services is not just a business but a way of life. For those who view this responsibility as an honor, these tips will serve as a basic guide to funeral homes and financing.