When it comes to financing your company and protecting your business assets with commercial insurance, there are so many options out there it can feel overwhelming. Busy entrepreneurs like yourself don’t have time to research all the different options available. That’s why we teamed up with Fundera, the leading experts in small business financing, to help you understand the best way to finance and protect your growing company.
Jim Loughlin, Senior Sales Director at CoverWallet, and Paul Rosen, Customer Success Manager at Fundera, shared their expertise with the audience. You can read the highlights or watch the full recap below.
First up was how insurance impacted different phases of company growth.
A common aspect of a growing business will include adding to your team. There are many rewards of growing your team, these include:scaling your business, being able to delegate responsibilities, and utilizing your teams’ strengths to further expand the company.
However, every reward will also come with risks including:
- High turnover
- Increased workplace injuries
- Employment liability claims such as harassment, discrimination, or wrongful termination
Loughlin, offers the following advice regarding the appropriate insurance policies to have in place:
Worker’s Compensation, which is coverage that helps protect businesses and their employees from the resulting financial losses when a worker is injured or contracts an illness on the job. It helps cover the costs of the sick or injured employee's lost wages and medical expenses.
Employment Practices Liability Insurance (EPLI), which is coverage for employment-related claims such as discrimination or harassment
Errors & Omissions, which covers negligent acts or errors of the company or its employees
Directors & Officers, which provides coverage to the board, its directors and officers for negligence or wrongdoing
Second, a business’s growth will often include introducing new product lines which includes many benefits such as meeting the needs of your growing client base, adding additional revenue streams to the business, and more press exposure and brand awareness
However, the risks associated with new products include liability around:
- Improper labeling
- Product defects
Loughlin suggests the following policies to keep your business protected:
- General Liability insurance, which covers bodily injury, personal injury, and property damage by a third party (such as a customer)
- Product Liability insurance, which covers injury or damage resulting from the use of a covered product
- Professional Liability insurance, also known as Errors & Omissions insurance, covers financial loss arising out of negligence in providing a professional service.
Third, now that you have a larger team and more products, you may need to add a fleet of commercial vehicles. Having company vehicles can help you deliver more products, increase brand visibility through vehicle signage, and provide you with the convenience of driving a designated company vehicle as opposed to your personal car
However, having company cars can lead to costly claims associated with:
- Bodily injury from accidents
- Damage repairs
To protect your company Loughlin says that Commercial Auto is a must. This policy will cover third-party bodily injury and property damage claims as well as first-party physical damage of your own vehicles.In addition, towing and rental reimbursement is available as well when you have an accident with an uninsured or under-insured motorist.
Fourth, at a certain phase of growth, it may be necessary for you to add a Board of Directors. There are several benefits that come with creating a Board such as getting insight from industry experts, introducing the structure of corporate governance and accountability, as well as advice on the strategic direction of your company.
The risks of having a Board include:
- Breaching fiduciary duty
- Lawsuits from investors or governmental bodies and
- Potential misconduct
When starting a Board, having a Directors and Officers Liability policy is crucial for protecting your company. D&O is a broad policy that offers protection against lawsuits and the expensive cost to defend against these claims.
Fifth, when your company grows it’s natural to take on more clients. Having more clients has great benefits such as increased revenue and more brand loyalty.
But the more clients you have, the greater the risk of being targeted by cybercriminals and a greater exposure to data breaches. It’s a common misconception among small business owners that cybercriminals only target big companies. But, in 2017 nearly 70% of all cyberattacks targeted small businesses.
The average cost to recover from such an event is $880,000. To combat these risks Loughlin suggests Cyber Liability insurance, this policy will:
- Protect against both internal and external data breaches
- Loss of digital assets
- Costs associated with recovering from a data breach
As your business grows, finding the right financing option for your small business requires identifying your funding needs. Paul Rosen, a customer success manager with Fundera, says funding can fall into several categories:
- Everyday needs such as:
- Cash flow
- Emergencies or “rainy day” funds
Rosen suggests that small business owners use business credit cards, lines of credit, or products like invoice factoring for these types of expenses.
The next funding category is working capital, which includes:
- Marketing campaigns
- Equipment purchases
- Refinancing previous debt
Rosen says your need for working capital can vary throughout the year and the industry you work in. He suggests the following products:
- Term loans
- Equipment financing
- Lines of credit
Keep in mind that traditional bank loans have low-interest rates but longer payment terms, but with a business line of credit you can draw on it as needed.
When your business is growing there will likely come a time when you’ll need to make a large one-time purchase. In these instances, Rosen suggests a long-term loan such as a bank loan or an SBA loan.
When identifying your financing needs Rosen says there are several questions to ask yourself:
- How much are you looking for?
- What’s your timeline?
- What’s the general profile of your business?
Answering these questions can help you determine the best financing option for your business.
When you’re ready to apply for a financial product, Rosen says to make sure you have all your bank statements and tax returns ready to help make the process go smoother.
Once you’ve applied, you’ll probably ask yourself, “what’s a normal timeline?” Rosen says timing depends on the type of financial product you’re applying for:
- Offers can take 24 hours, weeks, or months
- Underwriting for traditional loans will typically take a few weeks
- Online lenders tend to have a faster turnaround time