Guide to Business Loans for Insurance Agents
Insurance helps individuals, families, and businesses handle unforeseen challenges. It offers entrepreneurs with a potentially lucrative line of work as well. If you’ve wondered how to get business loans for insurance agents, you’re likely looking to start your own business or keep it running smoothly. The good news is, you’re probably pretty good with numbers if you’re working in the insurance business. Plus, you’ve got a mind for planning ahead, which comes in handy when looking for a business loan for an insurance agent (let alone being a small business owner).
Even if you haven’t thought of how to get business loans for insurance agents before, there are tons of reasons why you might want to consider it. Insurance agents need business loans for tons of reasons. Those could include cash flow issues, real estate upgrades, payroll, and more. You may not be aware that all of these considerations (and more!) can qualify for different kinds of loans. As long as you know what kind of business loan for insurance agents make sense for your individual needs, as well as a good sense of your own past and current business experience.
The world of small business loans can be intimidating if you’re looking for business financing for the first time. There are heaps of options available, each with different pros and cons. We’ll help demystify the process of getting business loans for insurance agents, going through the most viable options out there and the reasons why borrowing money might make sense for your business. We’ll also talk about what you need in order to apply for a business loan, what qualifications you might encounter, and more.
Finding the Best Business Loans for Insurance Agents
When looking for the best business loans for insurance agents, you have to begin with knowing the ins and outs of your business, as well as the landscape for lenders and borrowers at the moment. Both of these things fluctuate, of course, and the loan market is always moving. Keeping up with these fluctuations can give you a leg up when you’re ready to borrow. Here’s what to look for.
What Insurance Agents Looking for a Business Loan Need to Know
The types of business loans that you can qualify for will depend first and foremost on your credit score. Your credit score telegraphs your history of financial responsibility to lenders who are considering giving you money; the better your credit score, the less risky you seem.
How to Identify a Business Loan That’s Right for You
There are two major components you need to evaluate to find a business loan that’s right for you.
First, you’ll need to size up the use case for the loan. Some loans are meant to be general working capital; others are meant to finance specific scenarios. For instance, business lines of credit are great for working capital, whereas invoice financing is a specific cash flow loan to help insurance agents that work on credit. (Don’t worry, we’ll go through both in detail below.)
Next, you’ll need to look at how quickly you need to get a hold of capital. Some loans take mountains of paperwork and several months to finance (SBA loans), whereas others (business credit cards) can be nearly instant, or take a single day. How urgent is your situation? Understanding this is paramount.
The Best Business Loans for Insurance Agents
Once you’ve thought about your credit score, the type of capital you need, and how quickly you need that money, you’re ready to evaluate your loan options. You have a lot of different options for the best business loans for insurance agents. Some are more flexible than others, but all of them can help you with improving your cash flow and making certain your business is solvent.
Best Insurance Agent Loan for Value: SBA Loan
SBA loans are widely regarded as the best business loans available. They have desirable terms: repayment terms between seven and 25 years, relatively low interest rates, and high capital amounts. You may want to consider an SBA loan—particularly, an SBA 7(a) loan—for things such as general working capital and commercial real estate upgrades.
Of course, you can’t just get an SBA loan if you want it; these loans are only given to the strongest candidates due to their desirability. Having a strong financial profile will make a big difference—that means a few years in business, strong revenue, and a very-good-to-excellent credit score.
If you’re a new business just starting up, you may also want to look into SBA Microloans. Although they only furnish capital up to $50,000, they’re purposely made for newer companies or expanding companies, especially those with very small teams (or even just solopreneurs).
It’s important to note that these are the snail mail of business loans, in the sense that they take quite a while to finance (at minimum 60 days). If you’re looking for quick capital, you’ll want to move on to a different type of loan. But if you have the chance to wait, it’s worth looking into SBA loans because of their relatively low cost.
Best Insurance Agent Loan for Flexibility: Business Line of Credit
You may be interested in the ultimate flexible loan, which is a business line of credit. A business line of credit enables you access to cash by “drawing” from a credit line that you have secured from a lender. As you need money, you can borrow against the credit line and funds will show up in your business bank account for use. Some lenders even often a debit card for instant access to your credit line.
There are two other big benefits to a business line of credit. The first, and maybe best, is that you only have to pay interest on the amount of the line that you use. For instance, if you’ve been approved for $250,000, and you only draw $50,000, then you don’t have to pay interest for that extra $200,000—it’s capital that’s waiting in the wings for you to access as you need it. Additionally, once you repay that $50,000, you’ll have access to the full $250,000 to borrow against again. That’s the other big benefit; it’s called a “revolving” line of credit.
If you qualify, you can get approved for a business line of credit relatively quickly—sometimes, in as little as a single day.
Best Insurance Agent Loan for Cash Flow: Invoice Financing
As an insurance agent, it’s very possible that you work on trade credit, which means that you enable those whom you invoice a period of time before their invoice balances come due. That’s good for business, but tough for cash flow if you have a lot of outstanding invoices at once.
With invoice financing, a lender will front you 85% of your invoice amount so you can access the capital tied up in the invoice ASAP. Then, when your customer pays up, the lender will return the remaining 15% minus their fees.
Of course, it’s a difficult pill to swallow, thinking about taking a bite out of your revenue. But if your cash margins are low, and it’s the difference between paying your staff and keeping your lights on, it’s a fair price to pay.
A great thing about invoice financing is that you can get approved for this type of business loan rather quickly. Sometimes, it just takes a day.
Best Insurance Agent Loan for New Gear: Equipment Financing
Equipment loans aren’t just for big manufacturing businesses. If you’re looking to overhaul the furniture in your office, or purchase new technology setups, you may be able to access equipment financing.
With this type of business loan, you get a quote for the equipment you’re looking to finance. Then, you bring that quote to the lender, who will front you the money for the purchase if you’re approved. These loans are what’s called “self-collateralized,” which means that the equipment you’re financing with the loan becomes the collateral itself. For this reason, business owners with slightly lower credit scores, or newer businesses without a great deal of credit history, may be able to qualify.
These loans are also quick loans. It may only take a couple of days for you to obtain your financing to purchase your equipment. That said, these loans are obviously not as flexible as other loans, but for the purpose of purchasing new gear, they’re ideal.
Best Insurance Agent Loan for New Businesses: 0% Introductory APR Credit Card
It may be strange to think about a business credit card as a type of business loan. But, used strategically, it can be a great financing tool for your growing business. Particularly, look at 0% introductory APR business credit cards.
With these types of cards, financial institutions offer a fixed period during which you don’t have to pay interest on any balance you carry. Many times, these periods are more than a year. After that, a standard APR based on your creditworthiness and the market Prime Rate will kick in. But, if you’re smart about spending and paying down your balance before the intro period is up, you can use these cards as interest-free financing for all different types of expenses.
You’ll also want to note that you may be able to transfer an existing balance to a business credit card with a 0% introductory APR period. That can make your credit card debt less expensive for that period (as it’s not accruing interest).
And, as you likely know, if you’re qualified you can be approved for a business credit card in a very fast time window.
What You Need to Apply for a Business Loan for Insurance Agents
Different loans require different documentation. Some require very little—bank statements, identification, credit score—and some require significantly more forms, like P&Ls, business plans, personal tax returns, and more.
If you’re going to apply for one of the faster options, here’s what you should expect to prepare:
- Personal identification
- Two to three months of business bank statements
- Outstanding debts
- Business licensure
- Outstanding invoices (for invoice financing)
If you’re thinking about applying for an SBA loan, here’s an abridged summary of what you should expect to provide:
- Personal identification
- Outstanding debts
- Business licensure
- Loan history
- Personal and business tax returns
- P&L, balance sheet, cash flow statements
…and more. Here’s a checklist for SBA loans so you can get a sense of the paperwork that’s required.
Finding the Best Business Loan for Your Insurance Agency
There are a ton of different business loans out there for insurance agents. The key to determining which one is right for you depends largely on your individual needs. Some loans work best for everyday expenses, which invariably come up for all small business owners. Other loans may help you take care of business essentials, such as computers, printers, and other tools of the trade. By knowing what you intend to do with the money, you can help ensure you’re getting the best deal possible. If you know your personal and business finances frontward and backward, you’ll be ready for any questions that might arise during the loan application review process too. With these elements in place, you can ensure that your insurance business is ready to take on a loan that can help you build your business’ future.
Meredith Wood is the founding editor of the Fundera Ledger and a vice president at Fundera.
Meredith launched the Fundera Ledger in 2014. She has specialized in financial advice for small business owners for almost a decade. Meredith is frequently sought out for her expertise in small business lending and financial management.