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Best Insurance Agency Business Loans

When you first start looking for loans for your insurance agency you may experience rejection from banks and other traditional financial sources, which may discourage you from the whole venture. On this page, we will help you find non-traditional insurance agency business loans.

Financially Reviewed by Thomas J. Brock

At a glance —  There are hundreds of new insurance agencies appearing every year, and most of them start out by seeking funding in the form of a small business loan. However, there are only a handful of outstanding lenders in the field of insurance agency business loans, which could be why you’re struggling to find an appropriate lender. In this detailed guide, our experts cover the features of the best business loans for insurance agencies, and provide you with recommended lenders.

Best Insurance Agency Business Loans

The table below reflects the top insurance agency business loans available so you can decide which one suits you best.  

 

Financing Need

Best Loan Type

Loan Features

Recommended Lender

Startup funds

SBA loan

  • Amount: Up to $5 million
  • Term: Up to 25 years
  • Interest: As low as 4.75%
  • Time to get the loan: Up to 2 weeks

SmartBiz

Equipment

Equipment financing

  • Amount: 100% value of equipment
  • Term: Up to 6 years
  • Interest: Between 4.00% and 40.00%
  • Time to get the loan: Up to 48 hours 

Fundera

Cash flow

Business line of credit

  • Amount: Up to $500,000
  • Term: Typically, up to 18 months
  • Interest: As low as 4.80%
  • Time to get the loan: Up to 24 hours

BlueVine

Finance recover

Invoice factoring

  • Amount: Up to 100% of the invoice value
  • Term: When the client pays
  • Factor fee: Typically, 1.00% - 3.00%
  • Time to get the loan: Up to 24 hours

Fundbox

Best Insurance Agency Business Loans Explained

In this section, we will provide an in-depth description of each loan type outlined in the table above. We will also explain the rationale behind our choice of recommended lenders for each type of insurance agency business loan.

1. SmartBiz - Best for SBA Loans

A Small Business Administration (SBA) loan is an excellent way to obtain capital funds to start your insurance business. Since the government guarantees most of the financing, you will likely have a longer period to pay back the loan. The other benefit of an SBA loan is that the interest rates are typically lower. However, you will need to work through an approved lender.

You can purchase most of the items you need for your insurance agency using a small SBA loan. This type of loan can help you lay down the path to success in your first few years. If you manage to have a successful turnover in the initial stages of your insurance agency business, you might be able to settle your account sooner than expected. Fortunately, with an SBA loan you won’t suffer from any prepayment penalties if you do so.

As a verified SBA lender, SmartBiz also specializes in construction loans. If you need to develop a property or perform renovations to get the building up to scratch, they will help you get government-supported funding. SmartBiz also has an excellent reputation when it comes to finding financing solutions for your specific industry.

smartbiz

2. Fundera - Best for Equipment Financing

If you need equipment and machines more than you require fixed assets, you may want to look at equipment financing. Whereas SBA loans require down payments, lenders of equipment loans generally offer funds that cover the full value of the assets. You can use this loan whether you’re buying or leasing items. Also, equipment financing loans typically come with a generous repayment period.

You will likely need a lot of equipment to get your insurance agency started. Computer technology, printers, insurance software, and scanners are only a few examples of what you will require to get started.  

Fundera is a hive of activity when it comes to loans, offering startup, SBA, and equipment financing. While you might approach it for machinery funding, Fundera will assess your situation and suggest the best loan solution for your insurance agency business. Fundera prides itself on being transparent in its dealings with its clients so you always know how much you owe.

fundera

3. BLueVine - Best for Business Line of Credit

If you’ve ever dealt with revolving loans, then a business line of credit’s system won’t be alien to you. The primary difference is that you won’t receive a lump sum, rather the funds will be available for you to draw money out as you wish. Also, you will only pay interest on the amount you use. A business line of credit will give you flexibility if you suddenly need cash for your insurance agency.

Every business needs a source of cash flow, including insurance agencies. A steady source of cash flow helps when there’s an emergency or you need to buy supplies at the local store. Ideally, you should try to keep such monthly expenses to a minimum and reserve your cash for emergency repairs or bills.

BlueVine has an excellent business line of a credit system, offering new companies up to $250,000 to get started. BlueVine raises the limit for loyal customers, and you can manage your funds via an online portal. They also offer competitive rates in comparison to other lenders. 

bluvine

4. Fundbox - Best for Invoice Factoring

Invoice factoring can give new businesses a boost. This loan is suitable when clients owe money to your business, and you need to cover your expenses in the meantime. Lenders purchase outstanding invoices while incorporating a factor fee as a means of payment. In this way, you have the assurance that you will recover your revenue, and you can continue with your operations as usual.

Clients have a habit of missing payments when times are rough. They don’t consider insurance a necessity until they need it, and so insurance payments often become the last item on their monthly budget. With invoice factoring, you can have the lender stress about obtaining the funds while you focus on paying your bills and wages.

Fundbox stands out as a great option for factoring even though, strictly speaking, it is an invoice financing company. Nevertheless, Fundbox is definitely an option that insurance agency businesses should look at for factoring, and it may even prove to be a better fit for you than typical invoice factoring. 

fundbox

Recommended Reading: Best Agriculture Business Loans for 2021

How to Choose the Best Insurance Agency Business Loans

Some lenders don’t take the potential of your insurance agency into consideration when you approach them for a loan. All they see is an opportunity to make money off you, leaving you at a disadvantage. You may even end up opting for the wrong type of financing. Therefore, you need to be diligent when choosing which loan provider you chose to fund your startup insurance agency venture.

First, you need to ask yourself why you need a loan. For example, do you want to purchase office space, obtain operating funds for your monthly expenses, or buy new equipment and computer technology? There are loans for every situation, so make sure the repayment terms and requirements of the loan you select meet the needs of your insurance business.

Be aware that some contracts have a clause that states that you can only deal with specific vendors. Other clauses may lock you in and prevent you from obtaining any other credit solutions. You want to retain the freedom and flexibility to add additional loans or switch lenders if you need to. This flexibility may come in handy when you look to expand your operations.

Recommended Reading: Best Retail Business Loans for 2021

insurance

How Much Does it Cost to Open an Insurance Agency Business?

If you haven’t attempted to open an insurance agency before, you may be fooled into believing it’s as easy as setting up a shop at home. Yet, there’s much more involved. To start with, you'll need to create a business plan that reflects the potential capital and operating costs of your business. A detailed business plan is essential if you hope to secure any of the insurance agency business loans outlined above.

When setting up an insurance agency you will need training and will have to obtain the necessary licensing. You will also need inventory and equipment. There is also more to running an insurance agency than the day-to-day grind of running your operations. You will also need to market your business and design your brand. Remember, there is much competition in the area of insurance, and your business will need to stand out above the rest.

You will likely also need to set up a professional website so that clients can apply for insurance online. If you pay enough for software technology, you will be able to develop a sophisticated client portal. An advanced client portal will make the management of your insurance accounts much easier. You should also ensure that you have your contact information in place so that your customers can easily get a hold of you when they need to.

Here’s a quick overview of the potential costs of running your insurance agency:

  • Marketing/lead services: $4,000
  • Website development: $1,500
  • Business logo: $800
  • Stationary: $750
  • Business cards: $300
  • Marketing brochures: $2,500
  • Cell phone and pager: $300
  • Office supplies: $350
  • Training/licensing: $2,500
  • Business associations: $2,000
  • Emergency cash: $5,000
  • Assets: $10,000
  • Employee costs: varies based on business size
Recommended Reading: Best Construction Business Loans for 2021

See Our Additional Guides on Industry-Specific Loans

Bottom Line

Obtaining insurance agency loans can be challenging, especially when you’re not sure how many clients you will attract in the first few months. Fortunately, there are lenders who are willing to work with startup companies that have no track record. These lenders will also help you along the way. In this article, our experts have outlined the top insurance agency business loans so you can easily find a solution that will help you on your path to running a successful insurance agency.