Lenders have unique requirements for insurance agencies. Although they may differ among lending institutions, here are a few general categories you can expect a lender to focus on.

What's Your Motivation? 

It’s important for a lender to understand your motivation for financing to ensure they can meet your needs. Are you looking to:

• Utilize funds for hiring or marketing?
• Acquire another agency or book?
• Refinance existing debt to lower the interest rate or payment amount?

Tax Returns and Statements

Lenders will require tax returns and interim financial statements, reviewing your agency’s revenue growth and its ability to control operating expenses during cyclical periods.

Review your financial history for any non-recurring items in revenue or expenses and be prepared to explain such items. Provide a summary of carrier relationships, mix of policies and related commission structures for each type of policy. Lenders will want to understand any concentration risk in the portfolio, new customer growth, number of policies per household, and retention rates.  

Personal Credit Review 

Lenders will also ask about the tenure of your agency, in addition to performing a personal credit review. When thinking about your credit, here are a couple of things to consider:

• Stronger credit generally leads to a better interest rate.
• Weak credit does not necessarily mean you won’t be approved for a loan. However, it may reduce the amount the lender is willing to lend, the rate will likely be higher, and terms may be more stringent.

If you have pending litigation, disclose the details so the lender can determine the potential impact on your financial position.

Understand Your Position 

Understanding the objectives of your loan and reviewing both your business financial trends and personal credit history will better prepare you for your discussion with lenders.

To learn more about how Providence Bank can help you meet your agency’s goals, contact 866-903-1700 or visit Providence Bank online.