SBA Loans for Insurance Agencies

SBA insurance agency loans by the numbers

From FY2015 through June 30, 2026, the SBA approved 6,733 loans to insurance agencies and brokerages under 7(a) and 731 under 504, net of cancellations.^[1] Purchases are a bigger share than in most industries, and they are goodwill-sized.

Hardly any purchase runs 25 years, which tells you agency deals carry almost no real estate. In the 2022 Economic Census, 98.2% of agency receipts were commissions and fees. The asset being financed is the book.

Three ways into an agency

• Purchasing an agency as a first-time owner is an Initial Acquisition. At least 10% down that can't be waived, and the seller's history must show 1.25 coverage.^[2]
• Purchasing the agency you work in after 24 months or more, from a single owner selling 100% of the stock, is an Owner Buyout. Same 1.25 floor, different equity rules.
• Adding a second agency can qualify as a Business Expansion at a 1.15 floor, but only if your agency purchases 100% of the other agency's ownership interest.

The size limit for insurance agencies and brokerages is $15.0 million in average annual receipts, counted together with any agency you purchase.^[3]

Agencies are eligible; carriers are not

The SBA's list of ineligible lending businesses names "Life Insurance Companies (but not independent agents)." The rules bar life insurance carriers, not the agencies that sell their policies, and nothing in them makes a captive agent ineligible. Two other gates apply to every owner.

• Citizenship. 100% of direct and indirect owners and required guarantors must be U.S. citizens or U.S. nationals whose principal residence is in the U.S. That includes a producer you plan to give a small stake.
• The federal felony bar. Separately from the SBA, federal law bars anyone convicted of a felony involving dishonesty or breach of trust from the business of insurance without a regulator's written consent.^[4] Check it for every owner and key producer.

One word trips up agency buyers. When an SBA rule says "Agent," it means a loan agent: a paid loan packager, consultant or advisor. Fees you pay a loan agent don't count toward your equity. It has nothing to do with insurance agents.

Captive, network and franchise agreements

The SBA applies its franchise rules to any agreement it finds meets the FTC definition of a franchise, even one called a license or dealer agreement. A brand that meets that definition must be on the SBA Franchise Directory, and if it isn't, a delegated lender can't approve the loan.^[5] If you operate under several agreements, every one that meets the definition has to be listed. SBA loan data shows carrier agent appointment agreements and branch office agreements carrying franchise codes, so treat yours as an eligibility document, not paperwork.

The other question is who owns the book. You can only purchase what the seller owns, and whether a captive agent owns the expirations is set by the carrier contract and state law, not by the SBA. Before you sign a carrier or network agreement, or an offer on a captive agent's book, ask your lender to check the Directory and ask your attorney who owns the accounts.

What a lender counts, and the valuation cap

In the book's main example, Jennifer Park, a captive agent for seven years, has her new LLC purchase the assets of a retiring owner's independent agency for $1,300,000: the book, the agency name, the systems and the furniture, in leased space. An asset purchase is an Initial Acquisition.

• The valuation. Above a $350,000 Business Purchase Price, the lender orders an independent valuation, requested by and prepared for the lender. Jennifer's came in at $1,310,000. Total debt can't exceed it, and any price above it must be equity.
• The cash flow. The lender tests the seller's last fiscal year, or the average of the last two, after a market salary for the owner. Jennifer's retention and cross-selling plans can't count toward the 1.25 floor, because projections can't carry a purchase.
• Premium trust money. Premiums an agency collects for carriers belong to others. State law and the carrier agreements govern those accounts, and that money isn't working capital, equity or collateral.
• Quality of Earnings. At a $3,000,000 Business Purchase Price or more, an Initial Acquisition or Business Expansion also needs a QoE, which must assess customer concentration, contract continuity and whether revenue will hold after the sale. Jennifer is under the line.

Retention risk: no earnouts, rebates allowed

The biggest risk in an agency purchase is clients following the seller out the door. The SBA prohibits seller earnouts, so a price that rises when policies renew, or a holdback paid out only if retention hits a target, is out. A buyer rebate is allowed because it benefits the borrower, and any rebate must pay down the 7(a) loan.

Jennifer's seller agrees to refund up to $100,000 if first-year retained commissions fall below an agreed level. He leaves at closing and consults for 18 months. In an Initial Acquisition or a Business Expansion, the seller may not stay as an officer, director, stockholder or employee, and can consult for no more than 24 months in total, so he can't stay on as a producer. How producer-of-record and commission arrangements fit a consulting role is a question for your lender and your attorney.

The book counts for nothing as collateral

When the loan isn't fully secured, the lender must take available equity in personal real estate the owner holds alone, though not where the equity is under 25% of the property's value, so Jennifer's lender takes a lien on her $210,000 of home equity. On a Standard 7(a) loan for an agency that depends on one owner, the SBA also requires life insurance in the amount of the collateral shortfall; how much credit the home lien earns against that figure is her lender's call. An existing policy may be pledged. A shortfall alone is not a reason to decline the loan. Hazard insurance is required on pledged collateral for 7(a) loans over $50,000. The SOP doesn't require E&O coverage, though your lender may.

Down payment and seller notes on a purchase

For a first-time buyer, the SBA minimum is 10% of total project cost, and it can't be reduced or waived. A seller note counts toward it only on full standby, meaning no principal or interest for the life of the SBA loan, and limited sources like that can cover no more than half of the required injection. A temporary exception for veterans: from November 11, 2026 through September 30, 2027, the SBA has announced that an eligible veteran purchasing an existing business with a 7(a) loan may raise the full 10% from these sources (SBA News Release 26-117); ask your lender how it applies. A personal loan to a guarantor counts in full if it is repaid from a source other than the agency, and the salary the agency pays you doesn't qualify.

Jennifer needed $136,000. She put in $80,000 of cash, and the seller carried $56,000 on full standby for the whole loan term, under the half cap of $68,000. Many lenders ask for more than the minimum.

Jennifer's deal, start to finish

Every number below comes from the book's worked example. The interest rate is illustrative.

Purchasing the agency you work in

Chris Lawson has written and serviced policies at the same agency for six years. The founder is retiring and offers him 100% of the stock for $750,000. Because Chris has worked there more than 24 months and a single owner is selling everything, the SBA treats it as an Owner Buyout, and Chris and the agency are Co-Borrowers.

On the stock path, Chris puts in $45,000 of cash and the founder carries $30,000 on full standby, under the half cap of $37,500. He borrows $675,000 over 10 years. The agency's documented cash flow of $138,000, after a market salary, covers $96,148 of annual debt service 1.44 times, and his household test comes to 1.34. The agency's furniture and receivables count for $8,500, so life insurance for the $666,500 shortfall is required. The upfront guaranty fee is $15,187.50.

The founder stays 12 months as a paid consultant, a length he and Chris chose. Loan money can go to an owner or other insider of the business only to finance the change of ownership itself or as fair pay for services the seller performs, so the consulting fee has to reflect real work. One structure fails outright: a new holding company owned by the founder and Chris together that purchases the agency is a multi-step partial change of ownership, and the SBA doesn't allow it.

Adding a second agency: the whole company or only the book

Patricia Sandoval has owned her agency for 15 years. Her agency purchases 100% of the stock of a retiring owner's agency for $900,000, valued at $915,000. The acquired agency keeps operating as its own company and signs as a Co-Borrower. Both are in industry group 5242, so it qualifies as a Business Expansion.

Coverage is measured on both agencies' cash flow over all the debt payments after the deal. Her agency's $310,000 plus the acquired agency's $140,000 covers $137,378 of combined debt service 3.28 times against a 1.15 floor. The acquired agency alone would come to 1.21. Her agency puts in $90,000 from retained earnings and pays the closing costs in cash; her lender could have reduced or waived the equity and doesn't. The $810,000 loan carries a $21,262.50 upfront fee, and her household test comes to 2.23.

A purchase of only part of a book, such as one producer's accounts, may not be a change of ownership at all. The SOP counts an asset purchase as one only when the buyer takes all or substantially all of the seller's assets and continues the business; otherwise the lender may evaluate it as a start-up. Ask how your lender will classify the deal before you sign.

Licenses, appointments and closing

Agents must be licensed in the states where they work, with separate licenses for life and health and for property and casualty.^[6] States also license the agency itself, typically through a designated responsible licensed producer. Carrier appointments are contracts, not licenses a lender can lien. SOP 50 10 8.1 says nothing about any of them; your state and your carrier agreements decide. The SBA's rule is the timing: the lender must have evidence of every license the agency needs within 90 days after the loan finishes funding, and it can't sell the loan until it does.

Which SBA program fits an agency deal

On fees, FY2027 loans of $150,001 to $700,000 pay 3% of the guaranteed portion, loans above $700,000 pay 3.5% of the guaranteed portion up to $1,000,000, and the 0% upfront fee reaches an agency only if the loan is $700,000 or less and the agency is in a rural county.

Related guides

• SBA Collateral Requirements
• SBA Loan Down Payment
• SBA LOI Terms
• Verifying Seller Financials
• Global DSCR for SBA Loans
• What Changed in SOP 50 10 8.1