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Get Your Ducks in a Row

What you should know before you apply for a loan.
Sponsored by Providence Bank Agency Finance
get your ducks in a row

The last year has brought unprecedented challenges. Insurance agents have had to pivot their business plans in ways we haven't seen before. Many agents have transitioned from working in an office setting to working from home while continuing to service their clients. Agents have had to manage changes to their book as a result of declining income and policyholder unemployment and premium deferrals by many insurance companies. 

Adapting to unplanned changes can create costs that your agency might not be prepared for. Unfortunately, the changes you have endured or need to make may cost you precious working capital. Those expenses can add up quickly but are necessary to create a new normal in your office. If you need access to working capital, you may be considering applying for a loan or line of credit. But before you apply, you may want to ensure that you are prepared for the process.

First, gather your thoughts on what you're planning to use the funds for and how it will improve your business so you can relay that to the lender. 

It's highly recommended that you review your personal credit report prior to application. This not only gives you your credit score but also lets you see any items that may affect your score, such as credit cards and any outstanding loans or debt. You may also identify negative items on your credit report that you may have been unaware of and potentially take corrective action where necessary. You can run a credit report using a free credit reporting website.

Ensure all your insurance licenses are up to date and be sure to know if your agency is in good standing with the state, and if not, update your filings to ensure the agency is properly authorized to operate. You can request this information on your state's Secretary of State website.

Documents that will be essential to provide in the underwriting process may include:

  • The last 2-3 years of your tax returns, both business and personal.
  • Financial statements for the current year, including the balance sheet and income statement.
  • Commission summaries or other management reports from your carriers or agency management system.
  • Executed contracts with your largest insurance carriers.
  • Organizational documents including articles of incorporation (C and S Corps) or organization (LLC), operating agreement (LLC), and bylaws (C and S Corps).

Make sure to check on any outstanding liens your agency may have. If you are not certain that your agency has liens, you can perform a Uniform Commercial Code search on your state's website for any current U.C.C. filings on you or your business. Owners are sometimes surprised to find liens on an agency that they didn't know existed, and those can take time to research and be released, which will delay any new loan process.

Also, be prepared to complete a personal financial statement to help lenders review your financial profile. The personal financial statement will likely include:

  • Income.
  • Annual and monthly personal living expenses, such as rent, mortgage, debt and living.
  • Assets, such as bank accounts, real estate property, retirement assets and your agency.
  • Liabilities, such as mortgage, credit cards and child support.
  • Life insurance, tax liens or unpaid taxes.

Taking the time to review the items above before applying for a loan can save precious time in the process.

For more information on what's available for your agency, visit Providence Bank Agency Finance.

 Get Your Ducks in a Row

Friday, April 30, 2021
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