Preparing for a Business Loan for Your Insurance Agency

Worried about what you will need to provide to apply for a business loan? Here are the basics.

What will a lender ask for?

Initially, a lender will want all or some of the following:

  • Completed loan application: basic information about your agency, its owners, existing business debt and the type of loan you are seeking
  • Tax returns: your business and personal tax returns for the last few years
  • Personal financial statement: a summary of a business owner’s financial profile, including income and expenses; assets you own, such as cash, investments and property; and liabilities, such as mortgages, auto loans, student loans and credit cards. Normally, the lender will have a form they want you to complete, or you can search for one online.
  • Book summary: your primary insurance companies, products you write, premiums, retention and loss rates
  • Interim business financial statements: balance sheet and year-to-date income statement near the application date

What else may be required?

Lenders may also need some or all of the following:

  • Contracts and agency agreements, to review the significant provisions
  • 1099’s and/or commission statements, to validate commission revenue from your application and financial statements
  • The organization documents you completed when you formed your company, such as articles of incorporation, formation or organization and related documents, unless you are an unincorporated sole proprietor

What else will a lender look at?

Check these items prior to application to avoid delays in the process:

  • Tax liens or payment agreements: Be prepared to provide information on any outstanding tax liens or payment agreements you may have for prior-year taxes.
  • Good standing: Make sure your insurance licenses are active. If you are incorporated, check with your state’s secretary of state office to ensure that your business is still in good standing, which normally means you have paid any outstanding fees and filed annual reports if necessary. Each state’s requirements differ, but you can normally check this quickly by searching your business name on the state’s website.
  • Other liens on business assets: Make sure you disclose any liens on the business assets or commissions in the application. If you’re unsure whether such liens exist, perform a Uniform Commercial Code search for your business with your state’s secretary of state office.

Note: This information is intended to serve as general guidance about what documentation you can expect during the loan process, and is not intended to be a comprehensive list of all requirements.

Melanie Otto is a senior vice president and director of agency finance at Providence Bank and specializes in providing financing to insurance agents.

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