What Loan Options Are Available for Independent Insurance Agents?
Article By: Kimberly Bunce
There are several loan options available to independent insurance agents, as well as several ways that the loans may be structured. Some examples of why you may be looking for financing include agency acquisition, partner buyout, purchasing real estate, revolving line of credit, or refinancing. The financing options available for each example listed are as follows:
- Acquisition of an Agency and/or Book of Business
When acquiring a book of business, you may receive the option of seller financing, you may wish to finance through a bank, or you may choose a combination of both. Once the value of the business and purchase price is decided, a bank can inform you what maximum amount of that value can be advanced through a bank loan. The remainder can be provided by the buyer as a down payment or held back by the seller in the form of a seller note.
- Buying Out a Partner
As part of your perpetuation plan, you may wish to buy out (or buy down) an existing partner. Similar to acquisitions, a value for that partner's shares will be determined and the amount owed may be financed through a bank note, a seller note, or a combination of the two.
- Building an Office or Purchasing a Building that You are Currently Leasing
If you have been leasing your office space and get the opportunity to purchase it, or you decide to build or remodel your own office space, the bank can finance your real estate purchase, remodel, or construction.
- Revolving Line of Credit
A revolving line of credit can be thought of as similar to a credit card, in which the balance goes up and down as you draw money on that approved line. You will be billed monthly interest-only payments and can make payments up to any amount to reduce that line as cash flow is available. Lines of credit are typically approved for one year and are often renewed annually.
- Refinance of Existing Debt
Work with a bank to restructure or refinance your existing agency debt. This will simplify your balance sheet and could reduce your monthly payment.
For any of these options, it is important that you work with a banker that you can establish a relationship with and trust and one who understands the nuances of the insurance industry. If you do not feel confident and comfortable with your current banking relationship, you may consider looking to a financial institution that appreciates and understands the insurance industry, as well as the value of insurance books of business.
Kimberly Bunce, a relationship manager at SFB, brings a fresh perspective to SFB's Insurance Agency Lending Team. During her tenure at the bank, she has been involved with a complicated, ever-changing partner buyout that morphed into a partner buydown over a five-year period. Kimberly's experience as a CPA and her attention to detail helped the transaction run smoothly. Kimberly has since been involved in additional projects for the same owners as well as acting as a key advisor for other professionals.