There are many benefits to SBA loans, and lots of insurance agencies are finding that this is a particularly good time to apply for them. Unfortunately there are some downsides to an SBA loan that borrowers can encounter. One downside we’re hearing about lately is the length of time that SBA loans can take to be funded.
For 60 years, our client – a small town agency – had offered a mix of home, auto and business insurance, as well as employee benefits. In 2018, they had an opportunity to acquire a mid-sized agency that they could see would increase their book of business with their largest carrier. This would allow them to qualify for a higher commission rate and increase their business income. Unfortunately, a few credit dings and an unbalanced debt-to-service-credit ratio meant that their loan application was turned down by their local bank.
When they came to AgileCap, Lending Advisor, Kyle Castle, could see the opportunity that this acquisition represented for their business. As Kyle says, “I’m always intrigued by agencies’ vision and growth potential. The thing I love about my job is helping agencies grow.” Kyle worked with this client to develop a plan to improve their profitability and creditworthiness, and we were able to provide them with a loan for the acquisition. Within just six months, the agency stabilized their profitability and met their growth goals.
Two years later, this same client was approached by a local family agency which had actually been a competitor in their local market. This agency had recently been passed down to the next generation, but without an interested family member to assume leadership of the agency, they were looking to sell it. Our client could see that this acquisition was a good strategic fit for their business and they wanted to move on the opportunity quickly. Having worked with this client on the earlier acquisition made it even easier for us to fund this second acquisition and do it on their tight timeline.
The result of these serial acquisitions was that our client has moved from stabilized profitability to a 25% increase in gross revenue. At the same time, the loans they took out with us to fund their acquisitions have not impacted their cash flow. They’re set to break even in two and a half years.
We love doing multiple deals with our clients, especially because it means we get to help them reach business goals and strengthen their agencies. Contact us to see if an acquisition could be right for your agency.