Acquiring an Independent Funeral Home with Its Building in DuPage County, Illinois: An SBA 7(a) Model Study

Model study: an illustrative feasibility analysis built on public data for DuPage County, Illinois; not a client engagement.

Project summary

All figures in this table are model results or model assumptions, except the program rules, which carry their sources.

The credit question

A funeral home is one of the few small businesses whose demand can be counted in advance from public records. Deaths arrive at a predictable rate, and the rate rises as a county ages. The credit risk lies elsewhere, and a lender reviewing a file like this one needs to be persuaded of five things.

First, that the seller's calls stay after the sale. Families choose a funeral home for the name on the building and the director who served the last family funeral. A change of owner can cost calls for two years; the model takes a 5% dip in Year 1 and tests a deeper one.

Second, that revenue per call holds while families move from burial to cremation. A burial with visitation earns far more than a direct cremation, so a firm can keep its call count and still lose margin.

Third, that the pre-need book is funded and the buyer can honor it. Illinois makes the purchaser of a pre-need seller's business liable for any trust shortage existing before or after the sale, and bars completion of the sale until the State Comptroller has audited the books and licensed the new owner [3]. The trust money cannot be pledged [3].

Fourth, that the deal fits the 7(a) rules for a change of ownership with real estate: at least 10% equity, historical coverage of at least 1.25 on the seller's statements, and either a separate loan or a blended maturity for the real estate [1]. The amortization choice decides whether the deal passes.

Fifth, collateral. A funeral home is a limited-market building with a chapel, a preparation room that state law requires [4] and a coach garage. On SBA's collateral haircuts the loan is only about half secured.

This study's short answer: the deal passes the SBA historical test at 1.40x with a 17-year blended maturity. It fails if the whole loan amortizes over 10 years, and it fails if the operating buyer is not a licensed funeral director and must hire one.

Location and county economy

Population and growth

DuPage County lies directly west of Cook County in the Chicago metropolitan area. Its population has been close to flat this decade: the Census Bureau's Vintage 2025 estimates put it at 934,298 in July 2025, against an April 2020 base of 933,029 [5]. The county lost residents in 2021 and 2022 and regained them from 2023, mostly through international migration, while domestic migration was negative every year [5].

Source: Census Bureau Vintage 2025 components of change, 12 months ending June 30 [5].

A flat population matters less for a funeral home, which serves older residents already there, though retirees who leave take their eventual funerals with them.

Age structure

DuPage's population aged 65 and over grew from 154,782 in July 2020 to 181,684 in July 2025, up 17.4%, while the total rose 0.3% [6]. Residents aged 75 to 84, the band that will drive calls in the early 2030s, rose 30.4% [6].

Source: Census Bureau Vintage 2025 county characteristics by age and sex [6]; bands summed from five-year groups, changes and shares computed.

DuPage is older than Illinois at the top of the range: 2.31% of residents are 85 or over against 2.17% statewide (computed from [6]). Its death rate, about 7.2 per 1,000 residents against about 9.0 for Illinois (computed from [5]), has room to rise as the 75 to 84 group ages.

Deaths per year

From 2010 to 2019 deaths grew 1.40% a year (computed from [7]). The pandemic pulled deaths forward to a 2020 peak of 7,624 [8]; the 2024 and 2025 Census estimates sit near 6,700, about 5% above 2019 (computed). The two bases differ (calendar year against a year to June 30), so the comparison is approximate. The model starts from 6,724 and grows deaths 1.0% a year, below the 2010s trend, because part of the near-term base was depleted by the excess deaths of 2020 to 2022.

Source: IDPH death demographics by resident county, 2023 [9]; shares computed.

Eighty-one percent of deaths are of people 65 and over. Non-Hispanic White residents account for 83.5% of deaths, while the county's recent growth has come mostly from international migration [5]. As newer residents age, the faith and custom mix of funerals will change, and a firm's services and languages will need to follow.

Households and income

DuPage County's median household income was $110,974 in 2024 (SAIPE), against $83,327 for Illinois, and its poverty rate was 6.3%, against 11.5% statewide [10]. Household income a third above the state median supports revenue per call, and a poverty rate about half the state's means fewer families need a minimal service priced near cost. Local economic conditions affect spending per call more than call counts, which supports the model's flat real prices.

Employment and major sectors

Source: Census Bureau County Business Patterns 2023 [11]; annual payroll $45.2 billion.

No single industry dominates. For this asset the economy matters through household wealth and real estate value rather than through any one employer.

Market analysis

Demand drivers

Demand is deaths in the service area, times the share of families who call this firm, times what they buy.

Deaths are covered above. Nationally, NFDA projects that after 2025 the number of U.S. deaths will increase through 2045 [12].

Disposition choice is the second driver. NFDA projects the U.S. cremation rate at 63.4% in 2025, with burials at 31.6% [13], and expects cremation to reach 82.3% by 2045 [14]. NFDA's state table gives this path for Illinois [12].

Source: NFDA 2024 Cremation & Burial Report, state projections with base year 2022 [12]. 2020 is final data; later years are projections.

Illinois cremation is projected to rise about 1.36 points a year to 2030 (computed from [12]). The model starts the firm at 60.0% in 2027, below the state path, and adds 1.3 points a year. The rationale is that an established independent home with a long-tenured family clientele usually runs a higher burial share, while cremation-focused operators take a disproportionate share of direct cremations. The gap is an assumption, and the stress tests run a faster path.

Price is the third driver. NFDA's 2023 General Price List study puts the national median for a funeral with viewing and burial at $8,300 ($9,995 with a vault) and for viewing and cremation at $6,280; East North Central medians, which include Illinois, were $8,280 and $6,120 [15]. Those medians exclude cemetery charges and cash advances [15]. The line items explain the margin problem: on a cremation call the home loses the $2,500 median metal casket, the $1,695 vault and the hearse, and often the $845 embalming [15]. NFDA reports that cremation accounts for only 11.3% of industry revenue though cremations now outnumber burials, and that about one-third of funeral homes in the states that allow it operate their own crematories [12]. A home without one buys each cremation from a trade crematory; NFDA's median cremation fee to families was $400 [15].

Existing supply

County Business Patterns counts 35 funeral home establishments (NAICS 812210) in DuPage in 2023, with $12.7 million of annual payroll, plus 13 cemetery and crematory establishments [11]. Twenty of the 35 employ fewer than five people and three employ 20 to 49 [11]. Payroll averages about $362,000 per establishment (computed). The count covers employer establishments only, includes branches, and can include chapel-less cremation offices: one DuPage village approved a special use in 2014 for a cremation sales office that would do no embalming, cremation or memorial services on site [16].

Sources: deaths [8][9]; establishments [11] (the Illinois figure is the sum of county rows); ratios computed.

DuPage has about 193 resident deaths per establishment, above the state's 167, and the oldest decedent profile of the collar counties shown. The ratio is rough, since families cross county lines and many DuPage residents return to a Cook County parish home.

No public source tracks pipeline supply. New competition is more likely to come from low-overhead and online cremation sellers than from new chapels, which the model reflects in a rising direct-cremation share and flat real prices.

Demand method: share of resident deaths

For an acquisition, the right method is a market-share test of the seller's call history against county deaths. The modeled firm handled 246 calls in FY2024 and 241 in FY2025, about 3.6% of the county's 6,724 deaths (computed). The model sets its share at 3.33% in Year 1, 3.45% in Year 2 and 3.50% from Year 3, applied to deaths growing 1.0% a year.

All figures in this table are modeled. "Direct" is the share of cremations with no viewing or service; other calls are 4.0%. Revenue per call is after the pre-need adjustment and includes other revenue.

Forecast

Calls reach 245 in Year 3 and 263 by Year 10. Revenue per call grows about 1.4% a year against 3.0% list-price escalation, because the mix keeps shifting to direct cremation: the buyer pays for stable volume with a slowly falling margin.

Site and technical

Site requirements

The question is whether the building works and can stay in its use. The model assumes a going-concern chapel of roughly 9,000 to 11,000 square feet with two combinable visitation rooms, a chapel, arrangement rooms and offices; a coach garage with a covered transfer entry; parking for a well-attended visitation, often the binding constraint in municipal codes; and arterial access that can stage a procession. Illinois also requires each fixed place of practice to maintain a preparation room with drainage, ventilation and embalming instruments, except branches of a business that has one [4].

Zoning, licenses and environmental

Funeral homes in DuPage sit mostly inside municipalities, which often treat them as special uses; Downers Grove, for example, lists a funeral services business as an allowable special use in its B-3 district [16]. The acquisition needs no new approval if the special use runs with the land, but counsel should confirm the zoning letter, any ordinance conditions, and whether the building is legally non-conforming on parking. A non-conforming building that is destroyed may not be rebuildable as a funeral home.

Licenses are personal. Illinois makes it unlawful to practice funeral directing and embalming without a license from the Department of Financial and Professional Regulation, and requires licensees to work from a fixed place of practice; a corporation cannot be issued the license, and a trade name must be advertised with the owner's name [4]. The pre-need seller license is issued by the Comptroller and does not transfer: the new owner must apply, and the Comptroller audits the seller before the sale can be completed [3][17].

SOP 50 10 8.1 lists NAICS 8122, death care services, as environmentally sensitive unless no embalming or cremation occurs at the property, and a NAICS match requires the environmental investigation to begin with a Phase I, regardless of the loan amount [1]. The modeled home embalms, so a Phase I is budgeted.

Approach and schedule

The transaction is an asset purchase: the buyer's new entity takes the real estate, vehicles, equipment, trade name and goodwill, and assumes the pre-need obligations. The Comptroller step, not the lender, sets the timetable.

Week counts are model assumptions; the 21-day, 10-business-day and 24-month limits are the cited rules.

Development budget and sources and uses

An acquisition has no construction budget, but SBA bases the equity requirement on total project cost, meaning all costs required to become operational, regardless of the source of funds [1]. The modeled price is $2,750,000: $1,450,000 for the real estate and $1,300,000 for the business. That is 5.75 times the seller's FY2025 adjusted EBITDA of $478,156 and 5.58 times the two-year average (computed from the model). As a cross-check, rent on the real estate at 9% of value would be $130,500, leaving $347,656 of business earnings, of which $1,300,000 is 3.7 times. Both multiples are assumptions that the SBA-required business valuation must support.

All amounts are modeled. The fee follows SBA's maximum upfront fee chart; SBA may announce temporary fee changes for a specific fiscal year through an Information Notice [1], so the fiscal 2027 fee should be confirmed at application. The financed fee is circular with the loan, so the model solves for the loan at which the fee matches the chart on the resulting guaranteed portion of $1,891,515. The seller note is debt, not equity, because it pays from Year 1; SBA counts seller debt as equity only if it is subordinated and on full standby, with no payments of principal or interest for the term of the 7(a) loan [1]. The 12.0% cash injection exceeds the $317,843 minimum by $63,569, which lifts historical coverage from 1.37x to 1.40x.

The pre-need trusts appear nowhere in the table. Illinois makes each trust a single-purpose trust fund that is not available to the seller's creditors and is not subject to sale, pledge or mortgage [3]. The buyer acquires the obligation to perform the contracts and the right to be paid as each matures.

Revenue build and operating expenses

The seller's history

For an acquired business, SBA requires the lender's financial analysis to rest on the three most recent year-end statements, with the seller's information verified against IRS transcripts, and the coverage test met on the last fiscal year or the average of the last two [1]. The modeled seller's last two years, normalized for a market owner salary, are model figures built from the same unit prices and costs as the projections, deflated to each year.

The two-year average EBITDA of $492,512 gives 1.44x. Revenue fell slightly despite price increases because calls dropped by five and cremation rose 1.3 points, the pattern the projections continue.

Pricing and the revenue build

Prices are in 2027 dollars, net of pass-through cash advances.

All figures in this table are modeled.

Pre-need maturities

The model assumes 28% of calls come from pre-need contracts that realize 90% of the current price list, because many were sold years ago at guaranteed prices and trust earnings have lagged price increases. Illinois requires trust deposits within 30 days of receipt, with a corporate fiduciary that is not the seller or provider, so that by final payment the trust equals at least 95% of the purchase price of services and merchandise (85% for outer burial containers); the seller may keep an initial 5% (15% for outer burial containers) [3]. The Comptroller licenses pre-need sellers, requires annual financial reports and performs periodic compliance audits [19]. At death the home receives the trust balance or the policy proceeds, and the gap to the current price is a cost the buyer inherits.

The book is backlog, about 64 committed calls in Year 1, and liability: the buyer owes any shortage, and any shortage is a prior lien in favor of the trust [3].

Operating expenses

All figures in this table are modeled.

Payroll is mostly fixed, because licensed staff must be on call every hour whether the home handles four calls a week or six. Wages escalate 3.5% against 3.0% for prices, so margin peaks in Year 3 and drifts to 25.3%. Property tax is an assumed $40,000. A $35,000 capital reserve, escalating, covers coach replacement and building upkeep below EBITDA.

The ramp is a transition: 228 calls in Year 1, 239 in Year 2 and 245 at stabilization in Year 3.

10-year pro forma

All figures are modeled, before income taxes and distributions; the owner's market salary is in payroll. Debt service is the 7(a) loan ($304,289) plus the seller note ($36,637).

Revenue grows 30.8% over ten years but EBITDA only 27.1%, and cash flow after debt service is thin in Year 1 ($39,669) before settling at $117,000 to $142,000 a year. The business services its debt reliably with a narrow cushion, so the lender's concern is the downside, not the base case.

Debt structure

Terms

The bank prime loan rate was 7.00% on each day from November 3 to November 9, 2026 in the Federal Reserve's H.15 release [18]. The 7(a) maximum is $5,000,000, with SBA's guaranty to one borrower and its affiliates capped at $3,750,000 [2], so the loan fits with room to spare.

Why a blended maturity

SOP 50 10 8.1 limits change-of-ownership amortization to 10 years except for the real estate portion, which may run to 25 years, and allows either a separate loan or one loan blended on the weighted average use of proceeds, rounded to the nearest full year and calculated before the application of any equity [1]. Real estate is $1,450,000 of $3,178,432, or 45.62%: 45.62% × 25 + 54.38% × 10 = 16.84 years, rounded to 17. The Special Purpose Property exemption, which allows up to 25 years when 85% or more of total project cost is for real estate [1], is far out of reach.

All figures in this table are modeled. Only the blended loan clears the 1.25x Initial Acquisition test with a margin. Two loans pass narrowly; a 10-year amortization fails. The choice is worth $91,477 a year of debt service.

Equity injection and its basis

An Initial Acquisition needs equity of at least 10% of total project cost, which cannot be reduced or eliminated, and real estate bought in the same transaction carries the same requirement [1]. Seller debt counts only if subordinated and on full standby for the 7(a) term, and limited equity sources such as standby seller debt may provide no more than half of the required injection [1].

All figures in this table are modeled. The floor passes the historical test at 1.37x to 1.38x. A lender wanting Year 1 above 1.25x on projections would ask for about 15%. SBA also limits the total debt eligible to support a change of ownership, including seller debt not on full standby, to the business valuation amount [1]. In this model the debt financing the $1,300,000 business price stays below a valuation equal to that price because 12% of cost is paid in cash. If the valuation came in below the price, the loan would have to shrink and the gap would be filled with additional equity, and any limited equity used for it must be on full standby [1].

DSCR and break-even

Coverage by year

All figures in this table are modeled. SBA defines the historical DSC ratio as EBITDA divided by the combined debt service post-transaction [1]; the column after the capital reserve shows the cash a funeral home can actually spend on debt. For an Initial Acquisition the governing test is historical: at least 1.25:1 on the last fiscal year-end or the average of the last two, and the lender must evaluate post-closing projections but may not rely on them to meet the requirement [1]. The seller's FY2025 gives 1.40x and the average 1.44x. Year 1, at 1.22x, need not meet 1.25x, but it is when the working capital reserve is most likely to be drawn.

Break-even

At Year 3 prices and mix, revenue per call is $7,217 and variable cost $1,686, a contribution of $5,531 a call against fixed costs of $859,954.

All figures in this table are modeled. At base volume, revenue per call can fall 9.2%, to $6,551, before coverage reaches 1.00x. Losing 28 calls a year, about one family every two weeks, does the same. In a high-fixed-cost business each lost call costs $5,531 of cash flow.

Returns

Exit value

The exit capitalizes Year 11 EBITDA less the capital reserve, $478,287 ($525,324 less $47,037), at 15.0%: $3,188,578, or 6.07 times Year 11 EBITDA, close to the 5.75 times paid at entry. The rate is an assumption; funeral homes trade on earnings multiples, and a 2036 buyer will price in that year's cremation mix.

All figures in this table are modeled. The unlevered IRR of 14.3% is the better measure of the asset. The levered return looks high because the buyer funds 12% of cost; that is the point of the program, but the equity is thin, and a slow transition combined with a faster cremation shift erases it. Returns are pre-tax. If an outside investor's money counts toward the injection, distributions to that investor other than those made solely to cover the investor's tax on the business's income are prohibited until the 7(a) loan is paid off [1].

Sensitivity and stress tests

Rate and volume

The 7(a) loan is variable. At the current 7.00% prime [18] the maximum rate on a loan of this size is 10.00% [2]; the 10.25% and 10.75% columns describe a rise in prime.

All figures in this table are modeled. Volume dominates: a full point on the rate moves Year 3 coverage about 0.08x, a 5% loss of calls about 0.19x. At base calls, Year 1 coverage runs from 1.29x at 8.75% to 1.15x at 10.75%.

Downside scenarios

All figures in this table are modeled. Base-case cash flow differs from the pro forma total by $6 because of rounding in the scenario engine.

Three findings stand out. The transition is the largest near-term risk: a 12% loss of calls in Year 1 takes coverage to 0.80x, a shortfall of about $68,000 that the reserve covers for one year but not two. The cremation shift alone does not break the loan but squeezes Year 10 coverage to 1.17x and halves free cash, an erosion a lender sees coming in annual statements. And the labor case destroys the equity: an unlicensed buyer who must hire a licensed manager barely covers debt by Year 3 and falls below 1.00x later as wages outrun prices. Hence a licensed operating buyer is a condition.

Program compliance

Collateral analysis

Advance rates follow Appendix 15's fully secured calculation: improved real estate at no more than 85% of market value, used machinery and equipment at 50% of net book value, furniture and fixtures at 10%, and receivables and inventory at 10% of book value [1]. Asset values are model assumptions. Business collateral covers 54.0% of the loan, so the lender must take available equity in the buyer's personal real estate, which may be limited to the shortfall, though SBA does not require real estate with less than 25% equity [1]. Goodwill, most of the business price, carries no collateral value, and the pre-need trusts cannot be pledged [3].

Special purpose status

The SOP's 504 list of example Limited or Special Purpose Properties includes "funeral homes with crematoriums" [1]. The 7(a) change-of-ownership appendix uses a general definition: a limited-market property with a unique physical design, special construction materials, or a layout that restricts its utility to the use for which it was built [1]. A funeral home without a crematory may meet it, but the lender must document the conclusion. Here the label affects appraisal standards, not maturity or coverage, because real estate is well under 85% of cost and the appraised value does not fully collateralize the loan, which is the condition for relying on projections [1].

Risks and mitigants

Model determination

As structured, the modeled acquisition is financeable under SBA 7(a). The seller's last year covers post-sale debt service 1.40 times against the 1.25 required for an Initial Acquisition, the buyer injects 12.0% cash against a 10% floor, and the county supports the call base: about 6,700 deaths a year, a 75 to 84 cohort up 30% in five years, and about 193 deaths per funeral establishment.

The credit is weak on collateral and unforgiving of a bad transition: 1.22x in Year 1, about 54% secured, and a cash shortfall if Year 1 calls fall 12%. It works only with the 17-year blended maturity.

The conditions a lender would likely set:

1. A single 7(a) loan with blended maturity, calculated and stated in the credit memorandum.
2. An operating buyer who holds an Illinois funeral director and embalmer license, with the existing licensed staff retained through closing.
3. Written notice to the Comptroller at least 21 days before closing, a completed pre-sale audit with any trust shortage paid or escrowed, and the new owner's pre-need license issued before funding.
4. A holdback from the seller's proceeds, released after the first annual Comptroller report under the new owner, with a seller indemnity for trust shortages.
5. A seller consulting agreement of up to 24 months, at a fair fee, with no earnout.
6. A $150,000 working capital reserve funded at closing and a covenant to keep a minimum cash balance through Year 2.
7. A lender-ordered business valuation and a going-concern appraisal by a qualified appraiser, with a Phase I environmental site assessment.
8. Liens on available equity in the buyer's personal real estate and term life insurance for the collateral shortfall.
9. Annual statements with a call log by disposition type and pre-need maturities, so cremation mix shows before it reaches coverage.

A funeral home's demand is the easy part of the case. The risks lie in the transition, the pre-need book, the license and the amortization, and each is handled by a structural condition rather than a higher price for credit.