What You Need to Know About Insurance Agency Financing

March 14, 2018

If you want to start building a winning agency, you have to have a good understanding of insurance agency financing and how it should have an impact on your business. In order to take your agency to the next step, you’ll likely rely on a lender to help you get there.

For many independent insurance agency owners, running a business is just another checkbox on your already heavy to-do list. It’s difficult to manage everything needed to keep the ship sailing and still bring in new customers at the end of the day. Because of everything you have going on, things related to managing your business can be easily swept under the rug.

You may need to obtain a loan, a new book of business, purchase a new agency, or set up perpetuation planning. It might mean that you buy yourself out of your captive contract with an insurance carrier — but you can’t do any of these things without financing.

insurance agency financing

If you have the right plans in place, your agency will be able to continue to grow and find success, without having to give up the thing you value most — your independence. This is where financing is a crucial and necessary factor that your agency needs to have. With the ability to obtain loans and other materials needed to grow, your agency will be able better endure the ebbs and flows inherent in owning a business.

The direction you want to take your business will determine what type of insurance agency financing is right for you. Finding the right financial partner can be a difficult process to find a because you may find that a certain bank or financial planner doesn’t understand your agency the way you’d want them to. You might even run into someone who would rather purchase your business than help you out.

When you’re looking for a financial partner, choose someone who has your best interests in mind. The right choice will be someone who understands how much you value your independent status and will help you obtain the financing you need to achieve your goals.

With a financial advisor, your agency will be able to build up stronger financials that can be used to provide long-term benefits. In order for your agency to be profitable and start winning, you have to build up momentum to prove your worth. The right financing can help you do that, which will also lead to a stronger business valuation. When the time comes to pass your agency on to a successor, having everything well-managed will make the transition smooth and ensure that your agency continues to follow the same path even after you’re gone.

Here’s why you might need to obtain the following forms of insurance agency financing.

These Types of Insurance Agency Financing Could Be Key to Growing and Sustaining Your Business

One type of financing that you’ll most likely be looking for at some point is a loan. Whether you want to expand or if your business has run into some difficulty, a loan can get you where you want to go. Your agency can also use a loan to put your strategic business goals into action. From hiring a new producer to setting up your agency perpetuation plan, this type of insurance agency financing can provide you with the money you need to make sure your agency remains among the winners.

In order to get a loan, you may face some difficulty. Banks have altered their standards for providing loans since the crash of 2008, so it’s likely that you’ll have to provide a decent amount of financial information and how you’re going to use the money to prove that you’ll be able to pay them back.

If you’re interested in purchasing a book of business, understanding the finances around it is important to make sure your business continues to operate normally and sees benefits from the transaction after it’s over. You’ll need a loan, and you’ll want to make sure you understand the book of business inside and out so you can recognize the risks. Often, a Small Business Administration (SBA) loan can be used to buy a book of business. Because an SBA loan decreases the need for financing from the seller, it can also be used to negotiate a better price.

With the right insurance agency financing, you can make sure that you’re prepared for the future and set for the present, without having to take too much time away from the main aspects of your agency. A financial advisor can also help you if you’re new to the insurance business and you’re not sure where to start. The important thing to remember is that financing shouldn’t be put off, especially when it will directly impact your future.