Business loan protection
What is business loan protection?
Business loan protection is an extra layer of safeguarding, designed to provide businesses with added security to help them maintain stability during tumultuous times. It protects businesses when they lose a key member of their personnel who has financial liability for business loans and debts.
If lenders call in debts that are guaranteed against an owner, or key person, who is the loan guarantor and has been lost to the business, either through critical illness or death, it can be an incredibly stressful experience during an already difficult time. Business loan protection will help you clear the outstanding business overdraft, loan or commercial mortgage so your business can continue to function.
This is done by creating an insurance policy in the name of the loan guarantors. If they were to, unfortunately, pass away or become critically ill, the policy can then be invoked by the company. The policy will be paid out to the business for the purpose of clearing outstanding loans or debts. In cases where the business is a partnership, the policy can be written in trust for the benefit of the remaining partners.
How does business loan protection work?
Business loan protection is there for your business during some of the most difficult times a business can experience. Loan insurance will help take pressure from the financial, and emotional, stress involved in covering debts if you should lose a key member of your business.
Generally, it covers business owners or directors but can cover any key personnel who act as financial guarantors for your business. There are two major things to consider when looking at what type of business loan protection you may need:
Life assurance: This is life insurance and can only pay out if the person covered passes away.
Life assurance and critical illness cover: As well as covering the death of key people this also covers critical illness, which means a key person is unable to work within the business.
need business loan protection ?
Many businesses take out loans, either for initial set-up costs or during expansion. It’s not uncommon for businesses to take out multiple loans, or increase existing loans. Whilst the ability to repay this is not in question when things are running smoothly, the ability to repay is often dependent on only a few key people.
Business loan protection ensures that if you lose a key member of your team, you still have the ability to continue making payments and running your business. It can help you manage ongoing payments such as an overdraft, loan or commercial mortgage.
Before you organise business loan insurance, you’ll need to make sure you are clear about the liability of each individual in your company. Your business debts may be liable to more than one member of your business.
How can we help?
Get in touch for advice about business loan protection from one of our qualified financial planners.