When a business invests for growth, it often does so by taking on debt.
Business loan protection can help mitigate the risk of that debt becoming unaffordable due to a business owner suffering death or critical illness.
Read on to find out more...
What is business loan protection?
Business loan protection is life insurance that enables a company to repay a loan, overdraft, or commercial mortgage if, during the policy term, one of the owners, directors, or key employees dies or becomes terminally or critically ill.
Also known as business loan insurance, it pays out a one-time lump-sum cash benefit either to the business or directly to the lender.
Cost-effective business insurance
Many businesses borrow to purchase assets such as machinery, fund acquisitions, or run an overdraft / revolving credit facility to manage cash flow.
A business loan insurance policy is therefore a cost-effective way of protecting both the company and its shareholders.
Why is business loan protection important?
Upon a limited company owner's death, lenders reserve the right to call in a business overdraft, loan, or commercial mortgage.
This can often result in severe cash flow issues for the business or, in the worst-case scenario, the business being forced into administration/liquidation.
Personal guarantees
In addition, any personal guarantees provided for the loan or mortgage may be enforced by the lender. Potentially putting at risk a family home or other financial assets that form part of the deceased's estate.
As you can see, a business owner passing away or becoming terminally ill (with a diagnosis of less than 12 months to live) can have a huge impact on a company.
Personal guarantees provided for the loan or mortgage may be enforced by the lender
Responsible owners look to protect both their business and personal assets for the sake of themselves, their families, and their employees.
Business loan protection does just that.
