Throughout the life of your agency, your financial needs and opportunities will evolve. If you acquired an SBA loan in the early 2020s, your interest rate has probably climbed into double digits. In fact, some SBA loan holders could be paying 12% or more.
If you’re paying high rates on an SBA note — or if you’re dealing with high interest rates on other business loans — this is a good time to explore options that could help reduce your monthly payments. Here are four scenarios that could prompt you to contact our specialized Agency Finance team.
You’re no longer a rookie agency owner. When you first started or bought your insurance agency, you may not have qualified for financing that wasn’t partially backed by the Small Business Administration. But today, your agency is becoming well-established with your ownership experience, qualified staff, marketing plan, customer retention strategy, and steady referrals.
At this point, you can take a step back to assess the broad financial picture of your agency and look for opportunities to optimize your income. This could include refinancing high-interest SBA loans or other financial vehicles that are costing more than they should.
You manage your agency using the checkbook method. Some small business owners pay bills and purchase equipment based on what’s in their account, rather than operating based on a monthly P&L statement. While the checkbook approach can work short-term for small businesses, agencies that want to grow into larger, more profitable entities, need to elevate their financial management.
A more sophisticated financial approach includes assessing projected revenue (first year and renewal commissions), past/projected client acquisition patterns, capital needs, staffing costs, marketing expenses, cyclical fluctuations, and debt obligations. Evaluating these items can help you create a big-picture plan for your money and allow you to restructure your loans in a way that aligns with your agency’s cash flow. Refinancing debt — as part of an overall financial evaluation — may reduce your monthly loan payments. Our specialized team can help you review your cash flow needs and match it to an appropriate debt structure.
You’re ready to grow your agency. If you are having consistent success in acquiring and retaining clients, but don’t have enough staff to deliver superior customer service, you may need to hire temporary, part-time, or full-time support. Perhaps your agency metrics have become stagnant — your clients are happy, but you aren’t growing your book as quickly as you’d like, so you may need to increase your marketing efforts.
Both situations could be addressed with increased access to monthly cash flow to free up funds that are needed for growth, such as additional staffing or marketing costs. One way you can potentially reduce your ongoing expenses is to consider refinancing business debt, including SBA-backed loans, to lower your interest rate and monthly payments.
You’re overleveraged because you overpaid for your agency. If your agency isn’t valued at a level that aligns with the price you paid for it, you may be struggling to make your monthly loan payments. You could possibly reduce your monthly costs by refinancing and extending the term of your loan. Of course, there are multiple factors that affect this option. Our team can help you walk through the pros and cons of a potential refinance and what options may be available to you.
We Specialize in You
At First Mid, we’ve been providing financing for insurance agents since 2003. Our consultative approach to supporting your business growth includes offering specialized financing products that meet the unique needs of the insurance industry.
Talk to a team that “gets” what you do and cares about your success. Reach out to our Agency Finance team today at agencyfinance@firstmid.com or 877-894-2785.
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