How to Find Money for Your First Insurance Business
Small, independent insurance agencies aren’t necessarily difficult to start, but they do require some capital. If you’re new to entrepreneurship and you’re embarking upon your venture with a small team, chances are you’re going to go the route of starting an independent insurance agency. Once you’ve created a thorough business plan and estimated what you need financially to get started, it’s time to get the ball rolling and find funding. There are several routes you can take for your first insurance business, and each come with advantages and disadvantages.
Your First Insurance Business: Finding Money
The Bank Route
Getting business loans from banks or credit unions sounds like one of the simplest ways to approach funding your first insurance business. Unfortunately, this is not the case. Banks and credit unions are very risk averse. Unless you have a well established rapport with this bank, a history of being a highly successful and profitable business owner, or the amount you’re asking for is very low, it’s going to be difficult to convince a bank to give you a loan. If you fall into one or more of the previous categories, a bank loan may be worth exploring.
The Investor Route
There’s an investor for everything – including your first insurance business. If you have a very detailed business plan and a proposal that shows an investor exactly how you intend to spend the money, he or she will be more open to what you have to say. Start networking with professionals interested in similar industries. Attend trade events, work on your elevator pitch, and review and revise all of your materials to assure that they’re perfect down to the letter. It may take you a few tries to find the right investor, so don’t feel discouraged if it doesn’t happen right away.
The Self-Funded Route
For people sitting on a pile of excess money, self-funding a business isn’t that difficult. People who are worried about their living expenses, retirement, and savings often reconsider self-funding. If your business doesn’t take off the way it should, that money cannot be recovered.
One of the smartest ways to self-fund your insurance business is to make extra money and set it aside. Monetize everything you can monetize. Start freelancing or get a side gig in the sharing economy. Rent out a room in your house. Rent out any extra parking spaces you might have on a site like Parkhound. Buy and resell vintage or antique items on online marketplaces to fetch some extra money.
The Corporate Route
Large corporations often hand out low interest loans to new small businesses. They’re essentially investing with their own money to secure growth capital. If your insurance business seems low risk enough, you might qualify for a corporate backed small business loan. Remember not to approach other insurance companies or corporations who have already invested in insurance companies – they’ll write you off as a conflict. Be picky about what corporations you request small business loans from, because they’re equally as picky about the people they’ll give them to.
The Friends and Family Route
Many entrepreneurs turn to their friends and family for startup capital. If you have wealthy friends and family, it’s relatively low risk to accept money from them. If they’re all working hard to make ends meet, it may be unwise to put them in an awkward position by asking them to fund their venture. If things don’t work out well, it may significantly damage your relationship with the people you care about. It’s best to save friends and family funding requests as a last resort or only utilize them for a small portion of your funding. It’s less stressful for everyone involved.
Many people use a combination of funding strategies when they’re attempting to start their first business. You may need to be creative or even change the amount of money you’re requesting based on what’s available to you. Just be sure you only move when you know you’re ready and you’re positive your math is correct.
This article on how to find money for your first insurance business was provided by Sarah Kearns. Sarah is a hard working mother of three daughters. She is a Senior Communications Manager for BizDb, an online resource with information about businesses in the UK. She loves cooking, reading history books and writing about green living.