Life Insurance for SBA Loan

Excellent Post and information Deb Curtis. And Spot On!

Hi ^Searchfunder member‌ -- excellent question. The amount of the life insurance benefit amount is subject to the SBA underwriter discretion. For example, if the proposed business acquisition loan project includes the owner occupied commercial real estate, the underwriter may only require the life insurance benefit amount to be based on the loan amount less the appraised value of the commercial real estate. Keep in mind, if there is an established Key Employee "tied to the revenues" of the business you will be acquiring, i.e. a licensed electrician where you as the proposed new owner do not carry that license, SBA underwriters may condition that not only you securing the life insurance policy, but also a life policy on the key employee tied to the business revenues. Every bank or non bank lender has a their own credit policy regarding the conditions of life insurance. I recommend to my clients out of the gates to at the bare minimum to apply for the estimated SBA change of business ownership loan project dollar amount as the benefit amount. You want to do this out of the gates as life insurance companies can take time to process policies. The larger the policy, the longer the processing. Whole or term life insurance policies are acceptable. A collateral assignment will be placed on the policy in the bank or nonbank name. If the business owner or if applicable, key employee should pass away, the SBA loan would be paid in full and any remaining benefit dollars of the policy would be credited to the assigned beneficiary. ***I have seen a couple buyers be declined for life insurance. One gal was declined because she was expecting a baby. Per SBA, a loan may not be declined if a borrower is not able to obtain life insurance. The underwriter will request a copy of the insurance company decline letter to enclose in the file should the SBA audit the loan file. If I can help answer any other questions, feel free to reach out to me at --@----.com -- Cheers! -^Searchfunder member‌