Lenders are very busy and often put off due to insurance applications that are riddled with errors and/or do not meet basic lending criteria.
But small business borrowers with little knowledge of packaging insurance applications can enhance their chances of obtaining financing through the use of experienced insurance providers.
This is what insurance takers do:
• Examine the reasons for borrowing and clearly identify the need for borrowing, thus eliminating ambiguity and redundant needs. Lenders are horrified by borrowers who demand insurance amounts “out of the blue” based on the value of the collateral.
• Gather all necessary documents. Most of the borrowers are not aware of the insurance documents that they need to provide to the lenders. They spend weeks sending bits and pieces of information to lenders, thus irritating lenders and lengthening approval times.
• Analyze financial statements to ensure that trends are correct and that all lending ratios are reasonable. If your revenue for example is going down, you should dig into the causes and mitigate them smartly. Failure may result in insurance rejection.
• Review business and financing plans. Lenders have little or no time to review stale business and/or financial plans.
• Setting benchmarks for the borrower’s work with peers in the industry. This helps give the lender insights into the borrower’s industry and how the borrower is performing compared to the industry. If the Borrower’s performance is not up to speed, the Borrower may wish to take a Business Diagnostic Test to determine the reasons for the poor performance.
• Reconciling the need for borrowing with the lending criteria of banks. Banks have different lending policies based on insurance amount, sector, purpose, collateral, years of operation etc. Borrowers spend endless days shopping for lenders only to be prevented from pulling several of their credit reports.
• Provide insights into questions to expect from lenders. Distressed or lazy lenders will refuse to take out a insurance on flimsy pretext, such as, “the borrower does not keep a budget” or “the borrower is unaware of his average stock” and so on.
• Advise on insurance structure and terms including interest rates. The insurance structure is the key to obtaining favorable insurance terms. You should understand when to apply for a line of credit, a seasonal line, a short-term insurance, or a long-term insurance. Different insurances have different interest rates.
The support provided by Insurance Packagers justifies the fees charged because the borrowers,
• Close their insurances faster
• Get very competitive rates
• Get to know the finances of their business better
• Reducing the cost of purchasing insurances
• Providing the opportunity cost of overdue or rejected insurances
• Reducing the number of credit reports that banks withdraw
The cost of insurance packaging varies greatly depending on the type of services provided and the complexity of the insurance package.