SBA Loan Indemnification
Many checks, balances and hurdles are required when someone attempts to secure a capital advance from the U.S. Small Business Administration (SBA). One such obligation of lenders is life insurance, indemnifying the death of a borrower during a loan term. SBA lenders typically won’t close on corporate loans without collateralized backing in the form of term insurance at amounts often mirroring entire loan balances.
Domestic term policies are often assigned to address lenders’ insurance requirements, but insurance agents and advisors are finding traditional coverage is sometimes not readily available to prospective borrowers or is not the right fit for the specific circumstances. Personal health issues like cardiovascular disease, obesity, diabetes and cancer histories as well as additional impairments like drug and alcohol concerns frequently leave potential borrowers uninsurable and unable to secure the loans they need for business growth and entrepreneurship.
Another roadblock in the lending process is timing. Lenders often place tight timelines on the application and funding processes, and borrowers can struggle and sometimes fail to secure proper levels of insurance in time.
Fortunately, Petersen International has solutions to address these concerns. The Business Loan Failure to Survive (FTS) plan is a simplified-issue product that provides a death benefit which is collaterally assigned to a lending institution for the explicit purpose of covering a business loan. The program requires no exams or labs, just an application that can be underwritten, issued and assigned in a matter of days, not weeks or months.
The loan FTS plan employs a more liberal underwriting methodology than that of most carriers. By use of health exclusions and/or ratings, we are able to accept impaired risks that are typically declined or postponed by other insurance companies.
It is the perfect tool to meet the tight closing schedules of many lenders. The FTS coverage can also be taken out by clients who are currently in underwriting for traditional policies but are needing immediate coverage to close on their loan. They may purchase and then cancel the FTS coverage at their discretion once their approval comes in on the longer-termed coverage.
We are also excited to share that Petersen International has recently launched an electronic application platform for this program which has increased underwriting efficiency and the speed of policy issuance to further assist your clientele.
In addition to providing death benefits to clients in need of securing business loans, our disability insurance department also has significant solutions that complement the Failure to Survive program. Please contact us at (800)345-8816 with questions about insurances for SBA and other business loan requirements.