When applying for an SBA 7(a) loan, you will be required to meet certain insurance requirements to protect the lender's investment and minimize risk. The specific insurance requirements will depend on the lender's policy and the nature of your business, but some common types of insurance include:
Property Insurance: Property insurance is designed to protect your business property, including buildings, inventory, equipment, and other assets, against loss or damage due to fire, theft, vandalism, and other covered events.
Liability Insurance: Liability insurance provides coverage for your business in case of lawsuits or claims arising from property damage, bodily injury, or other covered incidents.
Workers' Compensation Insurance: Workers' compensation insurance provides coverage for employees who are injured or become ill on the job. This type of insurance is typically required by law, and failure to provide it can result in penalties and fines.
Business Interruption Insurance: Business interruption insurance provides coverage for lost income and expenses if your business is forced to close or suspend operations due to a covered event, such as a natural disaster or equipment failure.
In addition to these types of insurance, the SBA may also require you to maintain flood insurance if your business is located in a designated flood zone. The amount of insurance coverage required will vary depending on the lender's policy and the nature of your business.
On larger loans, the SBA lender may require that you assign the bank to a life insurance policy as well. This makes sure the bank will get paid in the event of your death.
SBA 7(a) Loan
Use of Funds: Working capital, debt restructure, business acquisitions, franchising, equipment, startup, payroll, marketing, expansion, lease hold improvements, commercial property, and the list goes on...
Terms: Up to 10 Years
SBA 504 Loan
Use of Funds: Commercial property for owner use. Must be 51% owner occupied. Not for real estate investing. Can include land, construction, furniture, fixtures, lease improvements.
Terms: Up to 25 Years
SBA Express Loan
Use of Funds: All the same use as the SBA 7(a) loan. It is an SBA 7(a) loan but only up to $500,000 and fast tracked. Very few banks participate and they create unique programs around it. Minimum 1 to 2 years in business.
Terms: Up to 10 Years