SELLING – Give yourself plenty of time
The reality is that if you want to sell your agency in the next 12 months and are just getting started, you are already behind schedule. For optimum results, preparing an agency for sale should begin at least 2-3 years before you put it on the market.
-Stay focused on growing the agency
-Make sure you maintain accurate and up-to-date financials
-Try to minimize the amount of change occurring within the agency (i.e. new carriers, staffing, equipment, etc..)
-Make sure your agency and its assets are free of liens or other encumbrances
Obtaining financing
A bank is the obvious place to find a loan, but most banks don't understand the cash flow embedded in your in-force book of business and aren't willing to lend against it. As a result, agency principals are often forced to put up significant personal assets as collateral. Even then, the liquidity crunch in the financial markets has led banks to shut out prospective borrowers without a high FICO score.
Fortunately, there's another alternative: a commercial finance company that focuses exclusively on providing commission-based financing to help insurance professionals buy, sell or build a business. That company is Oak Street Funding.
Understanding commission-based lending
Since innovating commission-based lending in 2003, Oak Street has loaned more than $200 million against all types of policies and has entered into partner programs with agencies, brokerage firms and insurance marketing partners across the country.
Using proprietary software to estimate future commissions, Oak Street can customize a loan for your needs and situation, from $10,000 to $10 million with a term of up to 12 years. The goal is to help you buy an agency with minimal out-of-pocket cost by leveraging the power of its cash flow (i.e. the seller's book of business.) If you already own an agency and want to expand, you can repay the loan with renewal commissions from your current book of business.
The loan process is simple:
1. After reviewing the policies to be used as collateral over the phone, we propose preliminary loan terms for your approval.
2. Your Oak Street coordinator helps you gather necessary documentation.
3. An underwriter performs due diligence to confirm the pricing.
4. We submit the loan for approval.
5. If approved, Oak Street funds the loan in an average of eight days.
After the loan is funded, Oak Street tracks renewal policies to make sure your future commissions support repayment with little or no cash required. This lets you concentrate on what matters most: your relationships with policyholders and carriers.
Reaching for the opportunity
If you want to build a business in the coming years, growth is vital – but getting to the next level may require significant capital. Look for financing from a source that understands the complexities of the insurance business: Oak Street Funding.
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The views, opinions, positions or strategies expressed by the authors and those providing comments are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of AgencyEquity.com.
