Insurers Alternative Financing Options
SEASONAL BUSINESSES
Whether you are operating an insurance agency and creating a book of business or operating a small or seasonal business, “Cash Flow” seems to be a major struggle. These seasonal trends show that 61% of small businesses around the world have cash-flow issues, and nearly a third are unable to either pay vendors, rent, utilities, and other short-term expenses and even have difficulty paying themselves.
While insurance agents do not fall under the seasonal umbrella, they nevertheless face those same slow-money challenges at times, and as many of 69% of them to be exact, have had sleepless nights due to ongoing concerns about their cash flow status.
Small business owner’s everyday fight to deliver amazing products and services to their customers and some, unfortunately, find themselves out of business within five years after becoming a General or Regional Manager. So how do they resolve this dilemma when they know the deck is stacked against them, what can they do?
The impact that negative cash flow has on small businesses is profound, and many are operating on margins so thin that frequent opportunities will put them on the path to failure. Economically, money is being lost every day due to the issues created by insufficient cash flow, and this is true not only in the United States, but it is happening in Australia, Canada, and across the globe. So now that we know this is a major problem, how can we ease the burden?
For many business owners and self-employed workers who struggle with cash flow, the problem isn’t that they don’t have the funds in the pipeline; it’s that they simply don’t have the funds readily available for real-time expenses. However, they do have receivables, and in the case of insurers, they have an ongoing book of business that creates a monthly income stream, including new policy sales that continuously grow through weekly promotional meetings and their constant marketing efforts, but still, they seem to be cash-poor.
So how does one pay these overhead expenses, and how can you accelerate that revenue stream that seems to move slower and slower every month? Perhaps the answer is going all out in the peak season and making as much money as possible to keep you going in the downtimes, but is there another approach?
The obvious solution may be to refresh the agency’s mode of Operandi by concentrating on new business and new products more aggressively. Revisit existing customers more frequently is always a smart approach. If you are a seasoned veteran, you no doubt have a goldmine of established customers and good relationships. Win back those old customers by selling new products and services to them. Since they already know who you are, you will not have to invest much time rebuilding your reputation and possibly will even earn another customer’s recommendation. During a slowdown it’s natural for people to rest, however, it does not help the bottom line, and a lender will review your marketing strategy as part of their underwriting process.
Cutting overhead expenses is another solution, and in practice, it is a good way to increase your profit margin, but it is slow and does not relieve immediate pressure. Taking a loan is the only dependable way to stabilize your business, but how do you find traditional lenders willing to assume the risk? Most conventional lenders may pass on the loan because of stiffer regulations and no guarantees: they just want to be paid.
However, private lenders are a far better option because they remain the bank’s greatest competitor. It’s their niche market and they are specialists in finding investors looking for business investments.
Since your insurance agency has already experienced those seasonal challenges like most small businesses and you know there will be months when revenues will be meager, even nonexistent, your challenge is to find a private lender that can help!
Whether your company is a startup or a 200-year old conglomerate, both will rely on borrowed capital to operate their business. Business entities have many more options than individuals when it comes to borrowing which can make business borrowing more complex than the standard personal borrowing choices.
First Capital International can assist you in making those choices, the right choice! Through our consortium of lenders, we can offer a wide range of lending provisions to meet those financial challenges to accommodate each borrower.
Both cash-flow-based and asset-based loans are usually secured by a pledge of expected revenue or asset collateral which is sufficient security for our private lenders. They have deep pockets to sustain the peaks and valley of cyclical businesses since accumulating and investing money is their expertise.
With our ability to tailor a loan that fits most companies, we can customize an agency loan to meet the needs of your specific financing situation. To underwrite a cash flow loan for an agency we examine the expected future revenue and its overall enterprise value. Using this method as an underwriting tool allows us the opportunity to pass funds to the borrower faster since an appraisal of collateral is not required. Cash is King! Further, this financing method enables our financial partners to account for any risk brought on by sector and economic cycles.
So in theory, we have eliminated the cash flow dilemma for our borrowers and turned it into a valued asset. Cash flow loans are sometimes better suited to companies that maintain high margins on their balance sheet or lack enough hard assets to offer as collateral against their debt.
We recognize your hard work in building your insurance book, and we also recognize a valuable asset when we see it. Now it becomes a waiting game which is a risk we can absorb for most clients and are willing to pass any benefits realized onto our valued customers.
If you find yourself facing these age-old problems, then take the next step and learn more about what we can do for you!
EASY ACCESS TABS
QUESTIONS & ANSWERS
AGENTS
If you’re looking for customized lending products for your agency, we and our affiliate providers can create capital growth opportunities by financing your business-building initiatives.
We collateralize those assets similar to traditional leveraging practices adopted by banks to increase your borrowing power.
By having the availability of financial resources, it will add to your longevity and business expansion by allowing flexibility for the acquisition of new agencies, purchasing or leveraging additional insurance books, marketing and staffing your growth initiatives with confidence while facing those challenges with the right partner.
Avoid the temptation of obtaining a loan directly from the carrier you represent, and while their financing offer may be appealing, that option is fraught with both ethical and business issues. The carrier may be more than willing to provide financing to your agency provided your level of business is maintained, but when the volume drops, things may change, as they have the power to call the loan, or worse, absorb your entire book because they have the control.
As an independent agent, you are looking out for the best interest of your clients by providing the best products and services, and that choice might impede your growth and your true independence, especially, if locked into loan covenants that restrict your ability to roll a book to other carriers that will provide better coverage and lower rates for your clients.
With the downturn in the market, traditional lenders have become less flexible and burdened by regulations, and only a small group specializes in agency finance. Private lenders understand the value you have created in your book of business and they are prone to growth and opportunity giving them more flexibility. They will help you compete with higher players by providing capital resources for business acquisitions while creating the value-building blocks needed for better choices.
$7.5 Million in monthly sales.
QUESTIONS & ANSWERS
REFERRALS
Fill out and submit our online application and upload your letter of request with business expertise, and after review and acceptance, you will be prompted electronically to sign a Referral Partner Agreement. Upon receipt of your signed agreement, we will provide you with your unique ID code.
When dealing with independent insurance agents who need a capital infusion to meet their financial challenges, simply direct them to our website to file an Agency Application using your identification code. We will reach out to you and your client to determine if they are a candidate for our services. Upon any initial closing or additional business purchases, you will be paid a referral fee within 24 to 36 hours after closing.
To make sure you receive swift payment of your referral fee we will request bank account information one week before the initial closing, and upon settlement, funds are wired to your business account based on total loan value.
No, only the agency will receive residual payments depending on their contract with the insurer, however, you will always receive referrals on your client’s new loan purchases, which can involve mergers and acquisitions to straight forward term loans or lines of credit.
Loans are customized to the agency’s specific needs and borrower qualifying expertise and proven track record, but we suggest reviewing our lending options and features to help answer additional questions.