Picture this: You’re moving smoothly down the path of getting funded for an SBA 7(a) loan. Then you discover the SBA requires you have certain types of insurance before you can receive your loan. So let’s talk about the insurance requirements for SBA 7(a) loans.
Stay ahead of the game by getting an early understanding of what kinds of insurance coverage will be necessary to close the loan. NEWITY is here to help remove those roadblocks so you can quickly get funded and start growing your business!
Why do you need insurance for an SBA 7(a) loan?
Generally, SBA lenders require certain forms of insurance before they fund your loan. Most lenders have insurance requirements for one primary reason: to protect you and your business from financial loss.
The insurance policies protect your business’s financial health by reducing the impact of large, costly, out-of-pocket expenses. Without this insurance, losses could harm your business’s ability to operate and meet financial obligations. This includes any new loan payments.
Risk assessment and consideration
Further, if your loan has collateral requirements, which serve as another layer of protection for the lender in the event you default on the loan, insuring the collateral directly contributes to reinforcing the collateral’s security. This is one of the most crucial aspects of the insurance requirements for SBA 7(a) loans.
Lastly, lenders are more likely to approve your loan applications and offer more favorable terms if you present lower risks. Insurance demonstrates that you are proactive about safeguarding your assets and operations. This proactive stance can translate into lower interest rates, longer repayment terms, and even higher loan amounts.
What types of insurance will I need?
There are two* types of insurance that you’ll be required to carry in order to secure your SBA 7(a) loan through NEWITY’s platform. These include:
Liability Insurance
Liability insurance is a common required policy for most businesses. This type of insurance covers claims brought by third parties that allege your business caused bodily injury, property damage, losses due to errors and omissions, product failure or data breaches. Since each business has its own products and services, there may be specific types of liability insurance that the SBA requires. For example, liability coverage can include General Liability, Professional Liability, and Cyber Liability, to name a few.
Property Insurance
Property insurance serves as a key requirement before funding your SBA 7(a) loan. It protects businesses from financial losses caused by damage or loss of physical assets. These assets include buildings, equipment, inventory, furniture, and other property vital to operations.
The insurance safeguards businesses against risks such as natural disasters, theft, and vandalism, ensuring recovery and continuity during challenging times.
Workers Compensation Insurance (*Only necessary if it is required by the state you do business in.)
In many jurisdictions, businesses are legally required to provide workers’ compensation insurance for their employees. This insurance ensures that your employees who become injured or ill due to work-related activities receive appropriate medical care and compensation for their lost wages. Requiring workers’ compensation insurance aligns with legal mandates and demonstrates that your business is adhering to labor laws and regulations.
NEWITY can help you obtain the proper documentation from your insurance carriers, secure new coverage, and ensure your hard work is protected. NEWITY has the capability to:
- Shop for you from leading carriers
- Find you the best coverage + price
- Connect you with Certificates of Insurance so you can get your loan funded and start scaling your business!
