Prepare These Documents to Get Pre-Qualified

Whether you are looking to acquire an existing insurance agency, refinance an agency loan or hire a new producer, you are embarking on a project that requires a good deal of planning. Part of the planning process includes getting pre-qualified for an insurance agency loan amount that will cover your costs. Pre-qualification typically takes three to five business days, provided you have the documents prepared for your lender prior to your meeting.

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Before approving an insurance agency loan, your lender wants to know that you have adequate experience to manage your business, sufficient collateral to cover the lender’s risk, and enough cash flow to repay your debt. The following is a list of the documentation typically required when applying for an insurance agency loan.

Use of Funds: Your lender will look for a detailed description of how you plan to spend the funds loaned to you. For example, if you are purchasing an agency, include real estate and agency purchase costs, staffing, technology purchases, and any other transition costs. If necessary, include marketing expenses and any working capital expenditures needed as you get your agency up and running.

Current P&L Statement:  If you already own an agency that you are remodeling, expanding or refinancing, include a current profit and loss statement and a balance sheet dated within 90 days. This will allow your lender to see how the agency is performing year-to-date.

Business Tax Returns: Your lender will want to see three years of tax returns as well as an interim profit and loss balance sheet. If you own other businesses, you’ll need to provide the same information on those businesses.

Business Debt Schedule: If you currently own your agency, your lender will ask for a business debt schedule detailing your current business loan, lease, or line of credit obligations.

Personal Tax Returns: Plan to provide your personal tax returns for the past three years. Your lender will use this information to verify your annual income.

Personal Financial Statement: Your lender will ask you to complete a personal financial statement showing your income, the value of your assets (such as your home, vehicles and savings accounts), outstanding debts, the amount of your debt payments, and monthly overhead. This will give your lender a good idea of your personal cash flow and the amount of additional debt you can comfortably absorb.

Personal Resume: Your lender may also ask for a personal resume or curriculum vitae, particularly if you are planning to fund an agency purchase. The objective of your resume is to show that you have the business, managerial or educational experience necessary to successfully manage your own agency.

In addition to the above documentation, your lender will look at your credit (FICO) score to analyze your creditworthiness. FICO scores can range from about 300 to 900, with the vast majority falling in the 600 to 700 range. For business loans, most lenders look for minimum scores in the mid to high 600’s. The key factors influencing how your credit score is determined are past delinquencies, credit management (do you always max out your credit cards?), age of your credit file, frequency of credit applications, and credit mix. Before applying for your loan, be sure to check your FICO score to ensure all information is accurate, and take whatever steps are necessary to strengthen your financial profile.

Once you have gathered the necessary documentation and confirmed an acceptable FICO score, you are ready to sit down with your lender to talk about your needs and the type of loan that will work best for you. With your loan prequalification secured, you have completed one of the most arduous aspects of your project and can now move on to one of the most rewarding – growing your agency as needed to provide exceptional customer care.