Picture this: You’re moving smoothly down the path of getting funded for an SBA 7(a) loan and discover the SBA requires you have certain types of insurance before you can receive your loan.
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 aim to protect your business’ financial health by preventing, or limiting the impact of, large, costly out-of-pocket costs. Without this insurance, any losses could be detrimental to your business’ ability to operate and meet its financial obligations – including your new loan.
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.
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 is the second policy that is typically required before your SBA 7(a) loan is funded. This type of insurance is designed to protect your business from financial losses resulting from damage or loss of their physical assets. These assets can include buildings, equipment, inventory, furniture, and other tangible property essential to your operations. This insurance provides a safety net against a wide range of risks, from natural disasters to theft and vandalism, helping you recover and continue operations in the face of adversity.
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 is here to help you obtain the proper documentation from your insurance carriers, secure new coverage, and ensure your hard work is protected. NEWITY’s expert insurance partner, Mylo, will:
- 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!