Cracking the Code: How Lenders Look at You and Your Agency
You have built a business that has significant value — recognized by lenders who understand the industry.
Cracking the Code: How Lenders Assess Your Ability to Borrow
For insurance agency owners, securing financing is critical in growing and strengthening their business. But how do lenders evaluate your ability to borrow money? Understanding the key factors can help you prepare and position yourself for the best possible loan terms.
Watch this presentation by Peter Friedman, AgileCap CEO, on how insurance agencies are best situated for borrowing
Cracking the Code: How Lenders Assess Your Ability to Borrow Money ( Agile Cap)
The 3C’s of Lending
Lenders typically assess loan applications based on three major criteria:
1. Collateral
Your agency itself is a valuable asset, and lenders consider its worth when evaluating your loan. They look at the Loan-to-Value (LTV) ratio, the liquidity of your assets, and any existing loans that may impact available collateral. Lenders also prefer a first lien position, meaning they have the primary claim on your assets in case of default.
2. Cash Flow
Can your business support new debt while maintaining financial stability? Lenders calculate your Debt Service Coverage Ratio (DSCR) to determine if your revenue is sufficient to cover both current and future obligations. A strong business DSCR signals that your agency has the financial health to sustain additional borrowing.
3. Character
Beyond numbers, lenders evaluate creditworthiness and experience. They review your personal and business credit scores, assess your history of financial responsibility, and consider your industry expertise. Your ability to articulate a compelling business strategy and use of funds can significantly impact their decision.
Be Prepared to Borrow
The lending market is competitive, and agency owners should be proactive when seeking financing. Here are three steps to improve your chances of securing a loan:
- Get Your Financial House in Order – Maintain accurate financial records and understand your agency’s financial position.
- Know What You Can Afford – Assess how much debt your agency can reasonably take on without overextending.
- Define Your Strategy – Have a clear vision of how financing will help you achieve business goals.
Good vs. Bad Reasons to Borrow
Borrowing can be a powerful tool—when used wisely. Good reasons include expanding your business, improving operations, and increasing profitability. Bad reasons involve financing ongoing cash flow shortfalls without a growth plan or taking on long-term obligations with uncertain returns.
Choosing the Right Loan for Your Agency
Different lending options come with varying requirements, costs, and risks. From traditional bank loans and SBA loans to specialty lenders like AgileCap, understanding the landscape ensures you select the right financial solution.
Key Questions to Ask Lenders
Before committing to a loan, ask potential lenders about:
- Interest rates, fees, and loan terms
- Minimum credit score requirements
- Collateral and lien requirements
- Flexibility for repeat loans and future borrowing
The key takeaway? Your lender should see themselves as a business partner, not just a financier. If they don’t, it’s time to keep searching.
Need Help Navigating the Lending Process?
At AgileCap, we specialize in financing solutions tailored to insurance agencies. Contact us today to explore how we can help you secure the capital you need to grow your business.
For more insights, visit www.agilecap.com.
