In order to be eligible for an SBA 7(a) loan for an insurance agency, the agency must be either a captive insurance agency (affiliated with an insurer such as Allstate or State Farm) or an independent agency (offering insurance from a variety of providers). Additionally, if the agency is a captive agency, the lender and the SBA will take a close look at the agency agreement to make sure that the insurer doesn’t retain too much control over the agency’s day-to-day operations. If they do, the agency could be considered an affiliate, making it ineligible for SBA financing.

If the agency is planning to purchase an existing insurance agency, the lender may not only rely on the agency’s tax returns to determine its eligibility for a 7(a) loan; they might also look at the commission statements provided by the insurer or insurers that the agency is working with.

SBA 7(a) loans have several advantages for insurance agencies. They have terms of up to 10 years for equipment and working capital, and up to 25 years for commercial real estate. 7(a) loans can be approved in amounts of up to $5 million. In general, insurance agency owners can use these loans to:

• Purchase another agency or book of business
• Build a new insurance agency
• Refinancing insurance agency debt
• Renovating an insurance agency
• Working capital

SBA 7(a) loans also offer lower interest rates, lower down payment requirements, and slightly larger maximum loan amounts than SBA 504 loans. Source and Source

SBA 7(a) loan disadvantages for insurance agencies include:

• Lengthy approval times (for standard SBA 7(a) loans)
• Lots of documentation
• Collateral is often required
• Certain businesses, including real estate investing, lending, gambling, and speculation are prohibited
• High credit scores are typically required (typically 680+)
• May be restrictions on supplemental/additional financing

To apply for an SBA 7(a) loan for an insurance agency, you will need to provide the following documents:

• Agreement to purchase the business
• Letter of intent to buy the business
• Business tax returns for the past three years
• Any outstanding business debt
• Long-term business contracts
• Documentation of business assets
• Business lease agreement
• Incorporation documents and/or business license
• Business plan
• SBA Form 1919 (borrower information form)
• SBA Form 912 (statement of personal history)
• SBA Form 413 (personal financial statement)
• Financial statements, including a balance sheet, profit and loss, and income projection.

In addition, the SBA will usually order an independent business appraisal to give lenders an idea of what the true value of the business is.

The SBA allows applicants to get help (for example, from a lawyer or a translator) filling out the application paperwork, but your lender will be required to submit information about who gave you help to the SBA, so you’ll need to document who this person is as well.

The maximum loan amount available for an SBA 7(a) loan for an insurance agency is $5 million. This amount is funded by the SBA with $3,750,000 and the private lender covering the rest.

If you are looking for a larger loan, you can try an SBA 504 loan calculator here.