How do you finance buying an insurance agency?

First question: who owns the book?

Everything a lender does with an agency depends on whether the agency owns its expirations, the right to renew and remarket its clients' policies. An independent agency that places business with many carriers generally does. An agent in a captive or exclusive program generally does not: in most such programs the carrier owns the renewal rights, and what the agent sells is its economic interest in the agency, subject to the carrier's approval of the buyer.

A buyer weighing a captive agency should settle this before anything else. The carrier's agent agreement, not the purchase agreement, sets what transfers and what happens to the book if the carrier terminates the agent. Lenders read that contract first.

How lenders read commission revenue

An agency's P&L shows one revenue line that is really several, and a lender treats each differently. It rebuilds the revenue from carrier commission statements and the agency management system, by carrier and by line of business.

Retention is the number lenders care about most: of the policies and premium in force a year ago, how much is still on the books. They look at it by line, because personal auto and home can behave differently from commercial and benefits. They also look for carrier concentration, since a carrier that cuts commission rates, restricts a line or leaves a state takes a share of revenue with it, and for client concentration, since a handful of large commercial accounts can make a book riskier than its size suggests. Our page on customer concentration covers how lenders weigh it.

One balance-sheet item needs care. Where an agency collects premiums on the carrier's behalf, that money is held in trust and belongs to the carriers. A lender does not count premium trust balances as the agency's cash, and a buyer should not count them as working capital.

Sizing the loan

Lenders start from the tax returns, add back the seller's own compensation and documented personal or one-off costs (see add-backs), then make two agency-specific changes. They deduct a market salary for whoever will run the agency and produce, which is often the buyer, and they strip or average the contingent commissions. In plain numbers:

SBA's minimum debt service coverage is 1.15x, and 1.0x globally once the owners' personal finances are counted. From 1 October 2026, under SOP 50 10 8.1, a change of ownership must show 1.25x on historical results. Conventional banks commonly look for at least 1.25x. For larger agencies, senior cash-flow lenders to lower-middle-market companies commonly lend 2x to 3.5x EBITDA, and unitranche lenders stretch further; where an agency falls in that range depends on its retention record and size. The buyer's salary question is covered in depth on how lenders account for the buyer's salary.

Licenses, appointments and what actually transfers

• Licenses. The buyer and the buying entity need the state producer and agency licenses for the lines the agency writes. Lenders ask for them because an unlicensed owner cannot legally receive the commissions that repay the loan.
• Carrier appointments. In an asset purchase the buyer's agency needs its own contracts with the carriers. A carrier can decline, or appoint on different terms. Lenders want to know which carriers carry most of the revenue and whether they have indicated they will appoint the buyer.
• Stock or asset purchase. Buying the agency's stock keeps its existing contracts and appointments in place, but carrier agreements often require consent on a change of control, and the buyer takes on the entity's history, including any errors-and-omissions exposure. Our pages on asset versus stock purchases and change-of-control consents cover the trade-off.
• Producers and staff. Account managers hold the day-to-day relationships. Lenders ask for the producer agreements, especially any that give a producer ownership of the accounts they write, and whether non-solicitation terms protect the book.
• Data. The agency management system holds the policies, renewal dates and client history. It should move with the business under the purchase agreement.

An agency buyer without insurance experience faces a hard question from lenders: who will keep the clients? A licensed operator, or key staff staying under agreements, is usually the answer they need. See industry experience requirements.

Structuring the purchase

Because there is little hard collateral, an agency purchase is a goodwill loan, and SBA 7(a) is built for that. The program's rules shape the structure:

• Equity. For a complete change of ownership, at least 10% of total project costs, from the buyer; see the equity injection.
• Seller note. Up to half of the injection can come from a seller note on full standby for the life of the SBA loan. A seller note that pays currently is allowed but counts as debt in the coverage test.
• Fixed price. Agency deals are often priced with a retention adjustment: part of the price is paid, or clawed back, depending on how much of the book renews in the first year or two. Where the price can rise with retention, that is an earnout, and SBA prohibits an earnout to the seller in a change of ownership it finances. A clawback, or a holdback released only if the book retains, raises the same question, so put it to the lender before the letter of intent is signed. The cleanest SBA structure is a fixed price that already reflects the retention risk. See earnouts and acquisition debt and escrows and holdbacks.
• Valuation. Where the amount financed, less appraised real estate and equipment, exceeds $250,000, SBA requires an independent business valuation, and the loan for the purchase cannot exceed it.
• Term. Up to 10 years for goodwill and working capital; from 1 October 2026 change-of-ownership loans amortize over no more than 10 years except the real estate share.
• Diligence. From 1 October 2026, financial due diligence is required on every change of ownership, and a quality of earnings report on acquisitions of $3 million or more excluding real estate.

The seller's transition matters more here than in most businesses, because clients renew with people they know. In a complete change of ownership the seller may not stay on as an owner, officer or employee, but may consult for up to 12 months, or up to 24 months under SOP 50 10 8.1 from 1 October 2026. A structured introduction of the buyer to the largest accounts during that period is part of what a lender is financing. See the seller-transition rule and buying from a retiring owner.

Above the SBA limit, or for an agency adding books to a platform, conventional senior lenders and private credit funds lend against recurring commission revenue, and those deals can use retention-based earnouts subject to the senior lender's terms. See add-on acquisition financing and acquisitions above the SBA limit. Lenders on any agency loan commonly require life insurance on the principal, since the agency's value walks with its owner.

The file a lender needs

Transparent's SBA acquisition checklist, with what an agency lender adds:

• Business tax returns, 2–3 years, and the extension if the latest year isn't filed
• P&L and balance sheet for the latest full year (never an older year), and a year-to-date P&L through last month-end
• Debt schedule, with copies of notes being paid off at closing
• Personal tax returns, 2–3 years, and a personal financial statement for each buyer owning 20% or more
• The letter of intent
• Commission statements by carrier, and a book-of-business report by line: policies, premium, commission and renewal dates
• Retention history by line of business
• Contingent and bonus commission history, year by year
• Carrier agreements and a list of appointments; for a captive agency, the agent agreement
• Producer and account-manager agreements, including any account-ownership terms
• Errors-and-omissions claims history
• The buyer's licenses and resume (supports Form 1919)

Once the documents are in, Transparent builds the full lender package — financing model, lender presentation, blind teaser and underwriting memo — in a day; by hand, the same package takes at least a week. The model separates renewal, new-business and contingent revenue so a lender sees at once what it is lending against. The file goes to lenders in our book with appetite for goodwill-heavy service businesses: 278 write SBA 7(a) and 504, and 1,148 write term and private credit. See the package and how we underwrite, and our SBA data page for insurance agencies for the SBA lending record in this industry.