What You Need to Know About Hazard Insurance for an SBA Loan

This year was tough for all of us! Thankfully, there’s a light at the end of the tunnel! More and more people are getting vaccinated, and while some people complain of the side effects, the main side effect is that life is starting to return to normal. 

For business owners, this is very promising. But with many operating in the red after a year of volatility and changing regulations, many businesses are trying to figure out the best way to recover and/or expand their operations. 

Their survival could depend on their ability to get a business loan. Luckily, there is help. It’s an SBA Loan, Man! A superhero with a big “L” on his shirt. No, that would be the lamest superhero of all time. 

Actually, a federal agency called the Small Business Administration, or SBA, supports small businesses, and matches them to the right lenders. But in order to get a loan, the SBA requires a business to have business insurance. So, let’s dive in and talk about what that means. 

While insurance requirements vary by industry, a common requirement is to have insurance coverages on the physical property and contents of the business. Loan applicants generally need some level of property insurance, depending on what type of property their business has. 

Most are required to get as the SBA puts it, “hazard insurance on any real or personal property collateral securing a loan”. Basically, any collateral that you offer up to secure the loan must be insured against hazards. 

Lenders just want to make sure that if you default on the loan and the property is lost in a fire or some other hazard, the lender wouldn’t simply lose their investment. So, if you’re a coffee shop, those fancy, steaming espresso machines have to be insured, along with tables and chairs, and any other property. 

What does getting hazard insurance for an SBA loan mean for your business? 

Well, for most Athos clients, the best way to cover their business property is through an Equipment Floater policy, also known as an “Inland Marine Equipment Floater Insurance''. 

You don’t even have to be a marine to get one! It’s just a fun name. This policy can cover many different types of equipment you own, including production, musical, sound, sports, and more, and it satisfies the SBA’s property or hazard insurance requirements. 

In fact, an Equipment Floater insurance policy is far superior to a property policy, since it covers contents and property anywhere, including your office, outside the office or in the field, and basically anywhere in the whole world, except countries with US sanctions (so be extra careful with your equipment in Cuba!) 

Also, equipment insurance is an all-peril policy! 

So, naturally, it includes many possible perils. Equipment floater insurance will cover: fire, water, lightning, accidental damages, earthquake, wind, flood insurance, transit coverage, equipment getting ravaged by wild lions, who knows what can happen! 

So getting an equipment insurance policy as your hazard insurance is even more broad than what’s even required to get an SBA loan. 

So, if you’re shopping around for a loan to help reopen your business, make sure you work with a reputable insurance company to get the coverage you need to secure your SBA loan! 

Or maybe you already applied for a loan, only to find out you need coverage?  

Reach out to Athos today, and one of our agents will guide you through the process! We got you covered!