As with any business venture, cash flow is a crucial factor that will dictate the growth of your independent insurance agency. Having cash in the bank not only determines which opportunities you can pursue, but also the pace at which you can expand your business. Whether you’re trying to get your insurance agency off the ground or take it to the next, acquiring the needed financial resources is essential.
Many agencies borrow money during their infancy to cover operational expenses, marketing, and other start-up costs. Although assuming debt to fund a new business may be inevitable, carrying a high interest rate over several years can constrain business growth, while future balloon payments can hang over your agency like a Damocles sword waiting to cut your cash flow in half. Refinancing your agency debt could be the best route to increased liquidity, and the key to driving your agency’s continued growth. Here are three reasons why refinancing is a wise move:
Lower Monthly Payments – Refinancing the debt for your independent insurance agency can let you reduce your monthly payments by extending the term of your loan or lowering interest rates. The savings combined with an additional influx of capital can be used to bring on more staff, upgrade computer systems, or buy an existing book of business to expand your client base.
No Balloon Payments – A loan with a lower interest rate and future balloon payment may seem like a good idea at first blush, but focusing on short-term cash flow can put you at financial risk down the line. Refinancing into a better debt structure can eliminate the uncertainty related to eventual balloon payments while supplying the business with new funds to support expansion.
Simplified Finances – By paying off seller notes from previous transactions or consolidating debt into a single refinance package, you can streamline payments and simplify bookkeeping.
Although refinancing agency debt offers several benefits, independent insurance agencies typically are unable to arrange traditional bank business loans, because they don’t have the physical assets required for collateral. For this reason, agency owners should consider partnering with the seasoned agency financing experts at Springtree Group (STG). STG has access to more than 30 niche lenders who specialize in the insurance space and offers customized financing solutions for independent agencies with annual revenues under $10 million.
Interest rates are generally around 6 percent for a ten-year note, and STG can construct a range of lending options to meet your agency’s needs and future goals. We have established long-term, trusted relationships with selected preeminent special purpose lenders, which enables us to deliver unique and specialized loan packages that use equity, seller notes, commissions, and/or hard assets as collateral. Refinancing packages are made on your terms, so that you are empowered to take your business to the next stage of its evolution.
Call Springtree Group today at (972) 395-8811 or contact us online to discuss the agency debt refinancing options available to your business. By improving cash flow and increasing savings, you can put your independent agency on the fast-track to success.