Finance Your Insurance Agency Acquisition with an SBA Loan

Before engaging sellers, obtain a pre-qualification letter from an SBA Preferred Lender Program (PLP) lender with experience financing insurance agency acquisitions. Provide your personal financial statement, resume demonstrating insurance or financial services experience, and a summary of the target agency including estimated purchase price and trailing commission revenue. Confirm that your active insurance license — or your plan to obtain one — satisfies lender requirements for operator eligibility.

Work with an M&A advisor or business broker who specializes in insurance agency transactions. Once you identify a target agency with $300K+ in recurring commissions, a clean E&O history, and transferable carrier appointments, submit a Letter of Intent (LOI) outlining purchase price, proposed structure (SBA 7(a) + seller note + equity), earnout terms tied to client retention, and exclusivity period. The LOI is non-binding but signals serious intent and allows due diligence to begin.

This is the most critical phase for both the lender and the buyer. Request a policy-level book report showing premiums, commissions by carrier and product line, renewal dates, and 3-year lapse and persistency data. Verify carrier appointment transferability directly with each carrier. Review 3 years of P&L statements and tax returns with commissions broken out by line of business. Assess client concentration — no single client should exceed 10–15% of total revenue. Engage an industry-experienced CPA to normalize earnings and calculate seller's discretionary earnings (SDE) or EBITDA for lender underwriting.

Compile the complete loan application including: personal financial statements, 3 years of business tax returns, interim financials, a signed purchase agreement, business valuation or appraisal (required for goodwill-heavy acquisitions over $250K), carrier appointment documentation, and a borrower narrative explaining your transition plan for client retention and producer management. Your lender will order an independent business valuation and may require an environmental review if real estate is involved. Submit to SBA for authorization if required by your lender.

Once the SBA authorizes the loan (or the PLP lender issues its own approval), you will receive a commitment letter outlining final loan terms, conditions precedent, and closing requirements. Work with your attorney to finalize the asset purchase agreement, non-compete and non-solicitation agreements with the seller and key producers, and any carrier transition or novation letters. Confirm the seller note is structured on full standby as required by SBA. Coordinate with the closing agent to ensure all licensing and E&O insurance transfers are in place at or before closing.

At closing, SBA loan proceeds are disbursed directly to fund the purchase. Immediately activate your client retention plan: introduce yourself to top accounts, confirm producer employment agreements are signed, and notify carriers of the ownership change to protect commission flow. Begin tracking renewal rates and persistency against your earnout milestones. Communicate proactively with clients — the first 90 days post-close are the highest-risk window for attrition and will directly impact both your earnout payment and long-term book value.