How to Buy a Insurance Agency With an SBA Loan
Buying an insurance agency means buying a book of renewals, and what is really for sale is the right to keep them. That right depends on the agency's carrier agreements, the licences that must be in place on day one, and whether the clients stay once the seller steps back.
See if your deal qualifies →SBA FOIA 7(a) loan-level data, NAICS 52421*, FY2021 through FY2026.
What you need to put in
Ten percent of the total project cost is the SBA minimum for buying a business, and the project cost is everything the loan pays for: the purchase price, the closing costs, and the working capital you are borrowing to get through the first months.
Half of that ten percent can be a seller note, which is the structure most buyers are hoping for. The catch since June 2025 is that the note has to be on full standby for the entire life of the SBA loan, meaning no principal and no interest paid to the seller for ten years. A note on two year standby, which used to qualify, no longer counts toward your injection. The other five percent has to be real money, and the lender will trace where it came from.
On rate, an acquisition loan of this size prices near Prime plus 2.75 percent, with Prime plus 3.0 percent the SBA ceiling above $350,000. Ten year term, no balloon, and no prepayment penalty at that maturity. If real estate is part of the purchase the term stretches and the arithmetic changes.
What to diligence in a insurance agency
The generic acquisition checklist covers the financials. These are the ones specific to this sector, and they are where deals here actually go wrong.
Read who owns the expirations
The agency's agreements with its carriers say who owns the expirations (the right to renew clients' policies) and what happens to them on a sale. Read every one before you agree a price, because the expirations are most of what you are paying for.
Licences and appointments do not come with the purchase
Producer licences belong to individuals. Agencies are licensed too, and under the NAIC's model licensing law, an agency must name a licensed producer who is responsible for its compliance (New Mexico, for example, calls this the designated responsible licensed producer). Carriers appoint the agencies and agents that sell their policies, so ask each carrier whether it will keep the agency appointed under your ownership, and get that in writing before closing where you can.
Revenue is commissions, and not all commissions are equal
Tie commission income to the carrier statements, the agency management system and the tax returns. Split it into new business, renewals and contingent or profit-sharing commissions. Contingent commissions depend on how the carrier's business performs and can swing from year to year. Look at retention by line of business for at least three years.
The seller and the producers hold the relationships
If the seller writes most of the business personally, plan the handover. In a full SBA buyout the seller can stay as a consultant for up to 24 months but not as an employee. Check whether producers who are staying have non-solicitation agreements, and how much of the book each one controls.
Earnouts are out, so plan the price another way
SBA does not allow a seller earnout in a 7(a) acquisition. A buyer rebate is allowed, where the seller pays back part of the price if the business underperforms, and the rebate goes to pay down the loan. Settle the structure before the letter of intent.
Licensing and regulation in this sector vary by state and change. This is a general description, not advice on your deal, so check anything you are going to rely on against your own state's current rules.
What the lender will ask you about
Beyond the usual credit questions. Have these answered before the file goes in and you save a round trip.
- ·Who owns the expirations under each carrier agreement, and will each carrier keep the agency appointed after the sale?
- ·What are retention rates by line of business over the last three years?
- ·How much of revenue is contingent or profit-sharing commission?
- ·How much of the book does the seller write personally, and what is the transition plan?
Who actually lends on insurance agencies
Live Oak Banking Company has approved more loans in this sector than anyone else since FY2021, at an average of $931K. A lender who has done dozens of these already knows what the licence transfer looks like, which is worth more than a slightly better rate.
| # | Lender | Loans | Total Volume | Avg Loan |
|---|---|---|---|---|
| 1 | Live Oak Banking Company | 341 | $317.4M | $931K |
| 2 | U.S. Bank, National Association | 334 | $99.3M | $297K |
| 3 | The Huntington National Bank | 250 | $49.0M | $196K |
| 4 | Readycap Lending, LLC | 196 | $52.4M | $267K |
| 5 | TD Bank, National Association | 171 | $17.6M | $103K |
| 6 | BayFirst National Bank | 170 | $25.2M | $148K |
| 6 | Newtek Bank, National Association | 170 | $68.0M | $400K |
| 8 | United Midwest Savings Bank National Association | 147 | $126.8M | $862K |
Source: SBA FOIA 7(a) loan-level data, NAICS 52421*, FY2021 through FY2026. Lenders with fewer than 3 approved loans in the sector are excluded.
Full insurance agencies lending data →Busiest states for insurance agencies
Buying a insurance agency: common questions
Can an SBA loan finance an insurance agency purchase?
Yes. SBA excludes life insurance companies but not independent agents, and a 7(a) loan can finance goodwill and customer lists, which is most of what an agency is. An independent business valuation is required once the business price is above $350,000.
Do I need an insurance licence before I buy?
The agency needs a licensed producer responsible for it on the day you close, and carriers appoint licensed agents. If you are not licensed yet, start early, because exams and appointments take time you cannot compress at the end.
Can I use an earnout?
Not a seller earnout. A buyer rebate is allowed, where the seller refunds part of the price if the business falls short, and the refund goes against the loan balance.
How much does it cost to buy a insurance agency?
Across the sector, the average approved SBA 7(a) loan is $468K, taken over 4,010 loans since FY2021. That is the loan, not the purchase price: the loan usually also carries closing costs and working capital, and the buyer puts in at least ten percent on top. Use it as a sense of scale rather than a quote.
How long does an SBA loan to buy a insurance agency take?
Sixty to ninety days from a complete file is the honest range for a straightforward acquisition, and it is the FILE that sets the clock rather than the bank. A lender with SBA Preferred Lender status approves in house instead of waiting on SBA review, which takes weeks out. Anything that needs a third party, an appraisal, an environmental report, a licence transfer, runs on its own schedule.
What can the loan actually pay for?
The purchase price of the business, the closing costs, working capital for the transition, and the real estate if you are buying the building too. A 7(a) loan for goodwill is typically a ten year term with no balloon and no prepayment penalty. Add owner-occupied real estate and the term stretches, up to twenty five years where the property is the majority of the project.
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