Business Loan Protection
Business loans can be taken out for a variety of reasons depending on the goals and needs of the business.
It could be to allow you to buy a new premises, fund new machinery, offer additional services, or help you fund further expansion.
Why would I need business loan protection?
Business loan protection exists to safeguard both the borrower and the lender should the business ever encounter circumstances where they may be unable to pay back their loan, thus providing a safety net for the business. This could be for a variety of reasons, one example could be ill health, should a key person become terminally ill or pass away.
Outstanding business loans may have personal guarantees which may have to be repaid when someone passes away, and for some lenders personal guarantees are a requirement through the term of the loan.
In circumstances where a personal guarantee is called in, the lender has the right to pursue the personal property and assets of the borrower should the business be unable to pay the debt.
Other real life risks to a business, should they be unable to pay back their loan, is that they may have to downsize.
This might be through the reduction of staff, or other cost cutting measures such as closing venues/offices/factories. This could potentially result in having to close down the business entirely should they be unable to repay the loan within the agreed time frame.
Often a condition of a business loan is that it must be repaid in full in the event that one of the named borrowers passes away. If this was to happen, the owner of the business would need to consider whether the business has sufficient funds to repay the loan in full. In this scenario, the business owner would have to consider whether they would want to use all of the business reserves, and also consider whether this would impact the stability of the business?
A business loan protection policy could allow you to pay off a business overdraft, a business loan, or a commercial mortgage should a key person within the business become terminally ill or die.
This type of policy provides peace of mind and financial security for the business, knowing that they have sufficient cover in place to protect the loan in the event that a key person passes away.
A business loan protection policy is specifically designed to cover business loans and commercial mortgages, and you also have the added option of including additional features such as critical illness cover and other optional extras.
Some lenders may insist that a business loan protection policy is in place before they formally approve the loan and release the funds. This is not the case with all lenders, however this type of policy is something that all businesses with debts should seriously consider.
The costs of each policy vary, and are dependent on various different factors.
Get in touch with our protection experts today if you would like to discuss your options.
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