Overview
When a valid Business Loan Protection claim is made a sum equal to the outstanding debt could be paid to either the business or directly to the lender.
Many companies borrow money to grow the business or to meet ongoing costs. But could your business manage the repayments if you were to lose a key person?
Business loan protection can be used to safeguard a number of different types of commercial debt. This may include overdrafts, business loans, commercial mortgages or directors’ loans.
Whoever guarantees the debt is usually covered by business loan protection insurance [1]. This is usually an owner or director. Should a valid claim be made, the cash sum can be used to repay the business’s outstanding debt.
Do I need Business Loan Protection?
There can be serious implications for businesses that are unable to pay back loans.
Having to suddenly repay an outstanding debt could cause a financial burden and may even put your business at risk.
A cash injection to repay business loans or debts upon the death of a key member of your business can help to give you, your staff and your stakeholders peace of mind.
How?
How does Business Loan Protection work?
If you are considering a protection policy for your business loan it is best to discuss your options with an adviser.
They can assess the level of debt the business has, the ability for it to be repaid should an owner be unable to work due to critical illness or death, and the level and type of protection best for you.
Essential?
Is Business Loan Protection compulsory?
Business loan insurance is not compulsory in the UK. However, for businesses that rely heavily on business owners or shareholders to meet the repayments of outstanding loans, it is worth considering.
It can be even more important if you have personal guarantees on the loans. Being unable to meet loan repayments could leave members of the business financially vulnerable.
[1] https://caspianinsurance.co.uk/business-loan-protection-insurance/who-is-business-loan-protection-for
