Funeral home acquisition lender document checklist
By Jason Taken, Business Advisor, HedgeStone Business Advisors · Last reviewed · 7 min read
An SBA lender financing a funeral home purchase needs four sets of documents: your forms, personal financial statement, and experience; the seller's tax returns, interim statements, and IRS transcripts; the signed purchase agreement and related contracts; and third-party reports, including a business valuation, an appraisal, a Phase I environmental assessment, and a QoE at $3 million or more.
Key takeaways
- Several items expire: SBA Form 413 must be dated within 90 days, interim business statements within 120 days, the appraisal within 12 months, and environmental reports within one year of the SBA loan number.
- The lender, not the buyer, must request the seller's IRS transcripts, through IVES or a Form 8821 naming the lender; the seller should agree to sign at the LOI stage.
- Death care properties that embalm or cremate need a Phase I regardless of loan size, and initial acquisitions priced at $3 million or more need a quality of earnings report with a cash proof.
- A gift letter or promissory note alone does not prove the equity injection; the lender wants the wire, a 30-day source statement, and evidence of the deposit or closing use.
A lender’s file for a funeral home purchase is built from four places: you, the seller, the deal documents, and outside professionals. This checklist follows that order and marks the items that expire, because a package that sits for four months often has to be partly redone. The rules quoted are from SBA SOP 50 10 8.1, effective Oct. 1, 2026; individual lenders often ask for more. For how the rules shape the deal itself, read our guide to SBA loans for a funeral home, and for where financing fits in the purchase, the buyer’s guide.
1. What will the lender ask you, the borrower, to provide?
Your eligibility forms, a current personal financial statement, credit authorization, and proof that you can run a funeral home. The credit memo must describe the depth of management experience and who will run the business day to day.
Borrower and guarantor documents
- SBA Form 1919, as the lender directs. The Borrower Information Form collects ownership, management, and eligibility answers for the applicant and its owners. Answer every question fully; blanks come back as conditions.
- SBA Form 413, dated within 90 days. The SOP calls for an owner financial statement from every 20%-plus owner and proposed guarantor, including the assets of a spouse and minor children. The lender may accept SBA Form 413 or its own equivalent.
- Personal tax returns. Most lenders want three years; check yours. They must agree with the financial statement.
- Resume focused on funeral service. Licensed years, arrangements conducted, management roles. A licensed director buying a first firm should show management, not just technical skill.
- License and director-in-charge plan. Your funeral director license, or the name, license, and signed agreement of the person who will be funeral director in charge.
- Guaranty commitments. Anyone owning 20% or more signs an unlimited personal guaranty. Investors should know this before they commit.
2. Which of the seller’s records will the lender verify?
Three years of financial history plus a recent interim statement, checked against IRS transcripts. The seller’s cooperation is not optional, so secure it in the LOI.
Seller financial records
- Three most recent years of returns or statements. The SOP bases repayment analysis on the three most recent years of historical financials plus an interim statement.
- Interim statement dated within 120 days. Year-to-date P&L and balance sheet. In our experience, a stale interim is a frequent cause of delay.
- IRS transcripts requested by the lender. The lender must obtain them and reconcile differences before first disbursement, through IVES or a Form 8821 naming the lender as designee. SBA does not allow the borrower or its own tax preparer to file that 8821.
- Debt schedule. Every business loan, line, and lease to be paid off or assumed at closing.
- Add-back schedule with support. The credit memo must justify additions to cash flow, including owner draw and nonrecurring items.
- Call and revenue data. Calls by year and disposition, and average revenue per call. SBA does not list these, but they are how the lender tests whether revenue will hold.
3. Which deal documents belong in the loan file?
Every agreement that touches the purchase, with all schedules and amendments. The lender reviews them for SBA conflicts, so send drafts early.
Transaction documents
- Signed LOI and purchase agreement. The SOP requires all related business, stock, and asset purchase agreements, including schedules and amendments.
- Seller note and standby agreement. A note counts toward the 10% injection only on full standby and for no more than half of it. The standby language must be in writing.
- Seller consulting agreement. In an initial acquisition the seller may stay only as a consultant, for 24 months or less in total. No earnout may appear anywhere in the documents.
- Lease, if you are not buying the building. The term, counting renewal options only you can exercise, should equal or exceed the loan term, with an assignment of lease and landlord’s waiver. See our guide to lease assignment in a funeral home purchase.
- Investor terms. The lender must review the terms of all other debt and equity in the deal, including any partner’s preferred return.
- Projections, when history falls short. If recent results do not show enough coverage after the new debt, two years of projections with stated assumptions are required.
4. Which third-party reports will the lender order, and when do they expire?
The lender orders the business valuation, the real estate appraisal, and the environmental work, and at a purchase price of $3 million or more, a quality of earnings report. Each has its own validity rule.
| Report | When required | Key rule | Shelf life |
|---|---|---|---|
| Business valuation | Every change of ownership (lender may value it in-house at $350,000 or less) | Qualified Source with an ASA, CBA, ABV, CVA, or BCA credential, prepared for the lender | Caps total debt at its conclusion |
| Quality of earnings | Initial acquisition or business expansion at $3 million or more | Cash proof for the trailing 12 months and last two fiscal years | Lender sizes coverage on its earnings |
| Real estate appraisal | When real estate is part of the deal | State-certified appraiser above $1,000,000; not one prepared for the buyer or seller | Dated within 12 months |
| Phase I environmental | NAICS 8122 property with embalming or cremation | Required regardless of loan amount | Dated within one year of the SBA loan number |
| Site visit | Every change of ownership | Lender visits the business and documents the date | Recorded in the loan file |
Order the Phase I the week the LOI is signed; our guide to Phase I reports for funeral homes explains what it covers. Our definition of quality of earnings explains what the accountant tests.
5. How will the lender verify your equity injection?
With a paper trail showing the money existed, moved, and was used for the project. Statements of intent do not count.
Equity verification
- Wire or check copy with proof of processing. It must show the funds reached your account or the closing escrow.
- Source-account statement covering at least 30 days. It shows the money was available before the transfer.
- Deposit statement or settlement statement. It shows where the cash went.
- No gift letter or note on its own. The SOP says a promissory note, gift letter, or financial statement is not enough without that corroboration.
- Borrowed equity disclosed. If any equity comes from a home equity line or other borrowing, the lender must review its repayment terms.
Worked example: documenting a 10% injection (illustrative)
Made-up inputs. Total project cost is $1,850,000: business $1,250,000, building $480,000, working capital $75,000, and closing costs $45,000. The 10% injection is $185,000.
The seller agrees to a $92,500 note on full standby, the maximum allowed as equity (half of $185,000). The buyer wires the other $92,500 from savings. The file needs the wire confirmation, a 30-day savings statement showing at least $92,500 before the wire, the escrow receipt, and the signed standby agreement. The 7(a) loan is $1,850,000 − $185,000 = $1,665,000.
Test the coverage on that loan with the SBA loan DSCR calculator before you apply.
6. Which funeral home items should you hand over before the lender asks?
The ones that answer the lender’s real question: will the calls, the preneed backlog, and the licenses survive the change of owner?
Industry-specific support
- Preneed register and reconciliation summary. Show the shortfall or surplus from The Preneed Reconciliation Ladder. Lenders treat an unexplained backlog as a hidden liability.
- Establishment, crematory, and individual licenses. Plus the state’s change-of-ownership steps and their timing.
- Insurance quotes. Property, liability, and auto. Where the loan is not fully secured and the business depends on one owner, SBA requires life insurance for the shortfall.
- Size-standard check. Under 13 CFR 121.201, NAICS 812210 is small up to $12.5 million in average annual receipts and 812220 up to $25.0 million, so most independents qualify.
If you have already sent the seller our buyer due-diligence request list, many of these items are already in your files; label them to match the lender’s list and send them in one upload.
Acquisition debt service and DSCR check
Estimates annual loan payments and debt service coverage for a financed purchase. Lender policies vary; confirm with your lender and the current SBA SOP 50 10.
Educational estimate only. Not an appraisal, valuation opinion, or loan approval.
Frequently asked questions
How long does it take to put together an SBA loan package for a funeral home?
Borrower documents can be ready in a week or two if you start early. The slow parts are third-party reports and the seller's records, which in our experience push most first-time acquisitions to 60 to 90 days from signed LOI to loan commitment. Ordering the valuation, appraisal, and Phase I promptly is the best way to shorten it.
Does the seller have to share tax information with the buyer's lender?
Yes, in practice. For a change of ownership, SBA requires the lender to verify the seller's financial data against IRS transcripts, which the lender requests directly. Sellers who refuse slow or stop the loan. Put the seller's cooperation with transcript requests and lender site visits in the LOI so it is agreed before exclusivity.
Do I need projections if the funeral home already makes money?
Not always. Lenders start from historical cash flow. If the most recent full year and interim statements do not show enough coverage after the new debt, SBA rules require two years of projections with supporting assumptions. Many lenders ask for a simple first-year budget anyway, so preparing one is worthwhile.
What happens if the lender's business valuation comes in below the price?
Total debt is capped at the valuation, so the gap must be covered with more buyer equity, a lower price, or both. A seller note on full standby still counts as equity only within its half-of-injection limit. Agreeing in the LOI how a valuation gap will be handled avoids a stalled deal late in the process.
Sources cited
- SOP 50 10 8.1: Lender and Development Company Loan Programs — U.S. Small Business Administration
- SBA Form 1919, Borrower Information Form — U.S. Small Business Administration
- SBA Form 413, Personal Financial Statement — U.S. Small Business Administration
- About Form 8821, Tax Information Authorization — Internal Revenue Service
- 13 CFR 121.201, Small Business Size Standards by NAICS Industry — Electronic Code of Federal Regulations