There are roughly 415,446 insurance businesses in the U.S. as of 2022, and it's safe to say that the industry is competitive. To stay a financially sound agency and attract clients, insurance firms may require sufficient capital, debt refinance, and a healthy cash flow. Sometimes, outside financial support can go a long way in getting your business off the ground or serving as a safety net to expand and grow your operations.
7 Loans for Insurance Firms
There are several small business loans that can help insurance firm owners meet their goals.
1. SBA 7(a) Loans
An SBA 7(a) loan is a popular loan that typically offers lower rates, manageable monthly payments, and 10-year terms.
This type of small business loan may be used by insurance firms to cover the costs of working capital (or the cash you may need to access quickly and periodically) and commercial real estate (such as refinancing your commercial mortgage).
- Amount of loan: Maximum $5 million
- Period of repayment: Up to 10 years (25 years for real estate loans)
- Schedule of repayment: Per month
- Time to funding: Once your application is approved by the bank, funds may be deposited into your bank account in as fast as seven days
2. SBA microloans
As the term “micro” suggests, this is a small loan that empowers small businesses to get to the next level. An average microloan is approximately $13,000 but can be up to $50,000. This type of loan is typically administered by specially designated intermediary lenders, who usually have varying requirements for lending and crediting.
A small insurance firm may use a microloan to pay for expenses worth $50,000 or less, such as to build working capital or to purchase office furniture, equipment, and supplies. However, it generally can’t be used to refinance existing debt or purchase real estate.
- Amount of loan: Maximum $50,000
- Period of repayment: Up to 6 years
- Schedule of repayment: Generally monthly, but repayment terms may also vary depending on the loan amount, how the funds are planned to be used, the requirements of the intermediary lender, and the needs of the small business
- Approximate lead time: 1 to 3 months for loan approval and funding
3. Bank term loans
A bank loan typically has fixed rates and offers fast access to the needed funds. Many financial institutions also promise faster application and approval periods.
An insurance firm’s eligibility for a bank loan — including how much it can borrow and other variables — depends on its history, revenue, and creditworthiness.
- Amount of loan: May range from $30,000 to $300,000
- Period of repayment: Approximately 2 to 5 years
- Schedule of repayment: Per month
- Approximate lead time for loan approval and funding: Differs between lenders
4. Business credit cards
A credit card may be considered a “revolving” loan — once you have a credit card, you’re eligible to borrow money from the bank within a limit. After your debt has been paid, the credit card typically resets. Additionally, most financial institutions incentivize credit card usage with cash back rewards.
While credit cards have a maximum that’s typically lower than most loans, they generally offer quick access to funds. For insurance firms, this type of business loan may be appropriate for small but urgent expenses, such as repairs and equipment.
- Amount of loan: Maximum $250,000
- Period of repayment: As long as the credit card is active
- Schedule of repayment: Monthly, including interest
- Approximate lead time for loan approval and funding: Up to 10 business days
5. Lines of credit
By its standard definition, a line of credit differs from a credit card. A line of credit is a type of financial product that enables you to loan money repeatedly within a certain limit and may be subject to interest rates and other fees. The funds from a line of credit may be accessed via a credit card, checks, and other methods. So, a credit card is a type of line of credit, but a line of credit is not necessarily used as a credit card.
A line of credit for insurance firms may be used for short-term funding for minor expenses such as payroll, office equipment, and supplies. The advantage of an unsecured line of credit for small businesses is that it doesn’t have to be designated for a specific purpose, allowing flexibility when needed.
- Amount of loan: Maximum $1 million
- Period of repayment: Ranges from 6 months to 4 years
- Schedule of repayment: May be flexible depending on the financial institution that the line of credit is with, but in general, it’s better to repay ASAP to avoid accumulating interest and other fees
- Approximate lead time for loan approval and funding: Varies between financial institutions or lenders
6. Equipment loans
An equipment loan may help small business owners outfit their insurance firms with phone systems, computers , copiers, and the other types of equipment you’ll need to run your daily operations. What makes equipment loans appealing is that they’re typically fairly easy to qualify for. The equipment you purchase with the money will generally automatically become the collateral. In the event that you can’t repay your loan, your lender will repossess what you purchased.
- Amount of loan: 80-100% of the projected cost of equipment
- Period of repayment: 3-10 years
- Schedule of repayment: Daily, weekly, or a combination
- Approximate lead time for loan approval and funding: Usually one week or less
SmartBiz® customer story
SmartBiz customer Renzo Campanella has worked in the insurance industry his entire professional career, honing his skills with corporations like Humana®, Allstate®, and MetLife®. He reached a crossroads when a company he worked for began reducing agents. Weighing his options, Campanella ultimately founded Florida-based Allstar Assurance®, a multi-line property and casualty insurance agency.
After several successful years in operation, Campanella determined that he could fuel growth and reach his goal of 20,000 clients with an infusion of capital. He worked with SmartBiz to secure a low-interest, 10-year term SBA loan for $350,000. He immediately put the proceeds to work, purchasing billboard advertisements, launching social media campaigns, and hiring additional agents. Read Campanella's story and learn about the five steps he took to successfully secure funding.
Find the best loan for your insurance firm with SmartBiz
With multiple loan options, each with its own set of pros and cons, it may be tricky to narrow down the right loan for your insurance firm. At SmartBiz, we help keep the application process simple and match you to the best lender that meets your financial needs.
Apply now to see if you prequalify*!