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The choice between SBA 7(a) and conventional financing shapes your down payment, your monthly obligation, and how much of the purchase price a bank will actually fund.
It also changed in June 2025. SOP 50 10 8 tightened the SBA side considerably, and comparisons written before that date — including much of what still ranks in search — describe rules that no longer apply.
In this guide: a current side-by-side comparison, what the 2025 SBA changes mean for funeral home deals, and how we decide which structure fits a specific transaction.
Quick Comparison
| Factor | SBA 7(a) | Conventional |
| Down payment | 10% minimum, often 15–20% | 20–30%+ |
| Maximum loan | $5M (max guaranty $3.75M) | No program cap |
| Goodwill financing | Yes | Rarely |
| Amortization | Up to 25 years with real estate | 10–20 years typical |
| DSCR expectation | Often workable at 1.20–1.25x | Typically 1.30–1.35x+ |
| Collateral | More flexible | Hard collateral preferred |
| Underwriting speed | Slower — SBA layer plus lender | Faster — single approval |
| Upfront fees | SBA guaranty fee applies | Lender fees only |
| Best fit | First-time buyers, goodwill-heavy deals | Established operators with liquidity |
What Changed Under SOP 50 10 8
The SBA’s current Standard Operating Procedure took effect June 1, 2025 and reversed several years of loosening. Four changes matter most for funeral home transactions:
Mandatory 10% equity injection. Complete changes of ownership and startups now require a minimum 10% of total project costs. The previous “do what you do” sourcing flexibility is gone.
Seller notes on full standby. A seller note counts toward the equity injection only if it carries no principal or interest payments for the entire SBA loan term, and it can satisfy no more than 50% of the requirement. Most sellers find a decade of standby impractical.
Partial ownership changes must be stock purchases. Asset purchase structures are no longer permitted when acquiring less than 100%, and the buyer becomes a co-borrower with the operating company.
Sellers retaining equity must guarantee. Any seller keeping an ownership stake provides a personal guarantee for at least two years, regardless of the percentage retained.
We always advise clients to confirm the current SOP with their lender before modeling a structure. Rules that moved once can move again.
SBA 7(a) for Funeral Homes
The 7(a) program remains the most accessible route to funeral home ownership, for one specific reason: it finances goodwill.
In this profession, goodwill is frequently the majority of the purchase price. A firm’s value sits in its name, its community standing, and its call volume — not in the building or the fleet. Conventional lenders are reluctant to lend against intangibles. SBA lenders can.
Where SBA fits best:
- First-time buyers without large capital reserves
- Acquisitions where goodwill dominates the purchase price
- Deals needing working capital rolled into the same facility
- Buyers who want longer amortization to protect transition-year cash flow
The tradeoffs:
- Guaranty fee. For fiscal year 2026, the SBA’s upfront fee applies to the guaranteed portion on tranches: 2% on the first $150,000, 3% from $150,001 to $700,000, 3.5% to $1 million, and 3.75% above that. (SBA Information Notice 5000-872051.)
- Documentation depth. SBA forms, tax transcript verification, and life and hazard insurance requirements were all reinstated.
- Timeline. The additional review layer adds weeks.
Full program details are on our SBA 7(a) funeral home loans page, and the step-by-step sequence is in the SBA 7(a) loan process guide.
Conventional Funeral Home Loans
Conventional financing comes directly from the bank with no federal guarantee, which means one approval layer and one set of rules.
Where conventional fits best:
- Established operators with strong liquidity and proven results
- Real-estate-heavy transactions where collateral covers the loan
- Deals above the $5 million SBA ceiling
- Situations requiring a fast close
The tradeoffs:
- Higher equity, typically 20% to 30%
- Stricter DSCR expectations, often 1.30x or better
- Limited appetite for goodwill, which excludes many funeral home deals
- Shorter amortization, meaning higher monthly debt service
Details are on our commercial funeral home loans page.
How We Decide Which Fits
The deciding variable is usually the purchase price allocation.
Run the goodwill test first. If goodwill and intangibles represent more than roughly 40% of the purchase price, conventional financing narrows sharply. Our breakdown of goodwill versus hard assets explains how lenders view the split.
Then test DSCR at both structures. Conventional amortization is shorter, so the same loan amount produces a higher payment and a lower coverage ratio. A deal that clears 1.28x on a 25-year SBA structure may fall below 1.15x on a 15-year conventional one. See funeral home DSCR explained.
Then check your liquidity after closing. A conventional deal that consumes your reserves to meet a 25% down payment leaves nothing for the modernization most acquired firms need in year one.
Also consider SBA 504. For real-estate-heavy acquisitions, the 504 program can outperform both. We compare them in SBA 504 vs SBA 7(a) for funeral homes.
Choosing by Situation
| Your situation | Better fit |
| First-time buyer, limited equity | SBA 7(a) |
| Goodwill is most of the purchase price | SBA 7(a) |
| Established operator, strong reserves | Conventional |
| Purchase price above $5M | Conventional |
| Need to close quickly | Conventional |
| Want maximum cash flow protection | SBA 7(a) |
| Real-estate-heavy, long-term hold | SBA 504 or conventional |
Rate is the last variable we consider, not the first. A structure that preserves cash flow through the transition matters more than a quarter point — current pricing context is in funeral home loan interest rates.
Why Choose Us
We work directly with federally insured banks and structure both SBA and conventional funeral home financing, so the recommendation follows the deal rather than the product.
- Both structures modeled side by side before you commit
- Current on SOP 50 10 8 and how it changes deal mechanics
- Over 20 years of funeral home lending, not general small business lending
- No brokers, no upfront fees, no lead handoffs
- Support from prequalification through closing
Conclusion
SBA 7(a) and conventional financing both fund funeral home transactions well, in different circumstances. SBA suits first-time buyers and goodwill-heavy acquisitions, with lower equity and longer amortization protecting transition-year cash flow. Conventional suits established operators with liquidity, faster timelines, and asset-backed deals above the SBA ceiling. The right answer depends on your purchase price allocation, your reserves, and the coverage ratio each structure produces.
Call Matt directly at 913-343-2357 to see both structures modeled against your specific deal.
Frequently Asked Questions
What is the main difference between SBA and conventional funeral home loans?
SBA 7(a) loans carry a partial federal guarantee, which lets lenders accept lower down payments, longer amortization, and goodwill financing. Conventional loans rely entirely on the bank’s own risk tolerance, requiring more equity and stronger collateral but closing faster.
Can I finance goodwill with a conventional loan?
Rarely. Most conventional lenders will not lend meaningfully against intangibles, which is a significant constraint in funeral service where goodwill often represents the majority of purchase price. This single factor pushes most independent funeral home acquisitions toward SBA financing.
How much down payment does each require?
SBA 7(a) requires a minimum 10% equity injection on changes of ownership, though lenders often ask for 15% to 20% on goodwill-heavy deals or with first-time buyers. Conventional financing typically starts at 20% and can reach 30% or more. Details are in our funeral home down payment guide.
Which loan closes faster?
Conventional, generally by several weeks, because there is only one approval layer. SBA deals typically run 60 to 120 days from accepted offer to funding. If your purchase agreement carries a tight closing deadline, factor that in before choosing a structure.
Does SBA financing cost more overall?
It can, once the guaranty fee is included. But longer amortization lowers the monthly payment, which often matters more than total interest during the first years of ownership. For a buyer whose priority is surviving the transition with reserves intact, the SBA structure frequently produces the better outcome despite the higher headline cost.
