Insurance Agency Acquisition Financing Checklist

If your agency is considering an acquisition, you may need to finance all or part of the deal.

This checklist will help you get organized and prepare your agency to seek funding for an acquisition (you can also listen to our podcast on Acquisition Financing):

1. Examine your business structure

• Do you need to create an LLC or corporation?
  (Be aware that some lenders will not offer financing to sole proprietorships)
• Review your company details:
  • Make sure you use the legal entity/business name on all loan
    paperwork.
  • Check that the current ownership and/or percentage ownership is
    represented in all legal documents associated with your agency.
  • Do you know who is/are signatories for your agency? Make sure you’re
    clear about exactly who needs to sign on loan documents.
• Do you need to renew any professional licensing?
• Do you need to update your agency’s operating agreement, bylaws, or articles of
  incorporation with any of the above information, or for any other reason?

2. Get your finances in order. You’ll probably need to provide a lender with at least the following documents:

• Full Tax Returns (3 years)
• Business Bank Statements (1 year)
• Carrier Reports
• Business Balance Sheets, P&L (3 years)
• Make sure that all of the financial documents above reflect the same information
  and tell a consistent story about your agency.

3. Present a unified front

• Confirm that all owners, partners, and key producers understand and support your agency’s acquisition plan.
• It’s worth saying again: check your bylaws to confirm that you know who the signatories are for your agency, if you have multiple owners/partners.
• What’s your communication plan? Will key staff be informed about the acquisition? At what point in the process?

4. Protect your credit

• Pull your credit rating and any partner’s credit rating.
• If necessary, work on improving your FICO:
  • Check that your credit cards aren’t over-leveraged
  • Avoid late bill payments
  • Do not open new credit accounts
• Delay any pending transactions on any credit cards, and do not take out any other loans.
• Review all of your debtors, pay off as much debt as possible in advance of needing to borrow for acquisition.

5. Know your existing book and the new acquisition

• What are the target agency’s current annual premiums?
• What is the target agency’s revenue stream?
• What are the target agency’s current annual commissions?
• Request a list of the target agency’s carriers, including the percentage of each
  carrier on their list.
• Note the types of policies carried.
• Check your master agreement and that of the target agency; can you use your
  book and commissions as lending collateral? (This is important to know if you’re
  planning to borrow from a specialty lender like AgileCap.)
• Make sure you understand the scope, size, and geographic distribution of the
  target agency’s book.
• Will the new book fit into your business?
• Due diligence on new book:
  • Retention rates?
  • Types of policies?
  • Carrier relationships?
• Do you need/want to work with M&A or insurance industry consultant?

6. Determine how much you’ll need to finance

• How much do you prequalify to borrow?
• Does your cash flow support the loan you’ll need to take out?
• Do you have access to capital/cash/equity to contribute to the purchase?
• How will you make up the difference between the purchase price and what you can cover, and what you can borrow?
• Can the seller help finance the gap?

Schedule a complementary 30 minute consultation with an AgileCap Lending Advisor to review your acquisition and lending requirements. Learn how we can customize a loan for your specific needs. It’s easy and quick, and there’s no risk or obligation.