Why Your Bank May Require Business Insurance to Secure a Commercial Loan
Most businesses usually have one thing in common. The need for more operating capital. Cash can help companies pay bills, keep up with payroll and maintain equipment. Funding can be used for growth by affording expanding market areas, adding staff or equipment or even expanding product lines.
If a company has a solid financial background and assets, they may seek out traditional funding through a commercial loan. But did you know that a bank may require a business to show proof of sufficient insurance before approving a loan?
Like with a mortgage, a financial institution wants to protect its interests when providing a loan. They usually will require homeowners’ insurance to provide a home loan. This is similar to what they may request from businesses when issuing a commercial loan.
If you are purchasing real estate for your business, for example, your bank will want to make sure the structure is sufficiently insured. If a loan is for other purposes and company assets are used to serve as collateral on the loan, the financial institution will want to make sure those assets are insured. This could not only include real estate but inventory, equipment, furniture and electronics.
Business insurance should be a foundation for any business. It can protect against liability claims, vandalism, fires, storms, theft and even loss of business. Your financial institution understands the importance of business insurance and you should to.
Whether you are considering starting a business, have a small or medium business or even a home-based business, contact us. Our independent business insurance agents will discuss the type of business you are undertaking and your specific risks. They will talk about your business structure, and how to ensure all involved parties are protected. They will then scour multiple companies they have access to to compare coverage and costs. In the end, you make the final decision in how best to protect your business. We invite you to contact us and get started today!