In my post from October, I discussed debt coverage ratios and EBITDA multiples. Now let’s talk about projecting cash flow. I’m shocked how many buyers make offers without figuring out what the cash flow will be with financing. I’m not alone either. I’ve spoken with many loan officers that deal with the same issue. This article is long overdue.
When it comes time to selling your agency, confidentiality is vitally important. You may be dealing with one or more buyers, each of whom will have a multitude of questions and requests and his/her own opinion of how to go [...]
Different lenders underwrite acquisition financing a little differently; however, they all typically want to stay under 6 x EBITDA on leverage. The reasoning is fairly simple…cash flow. As we’ll see below, agencies don’t cash flow well when they leverage themselves over about 6 x EBITDA. One of lenders’ key underwriting metrics is something called the debt coverage ratio, which is a measure of the cash flow cushion over debt payments.
National Preparedness Month is about taking the necessary steps to prepare for natural disasters or the unforeseen emergency. When it comes to preparing for the unexpected – the first step is to check your insurance coverage. Without the proper coverage [...]
If you think a loan is just a loan – stop. The purpose of a commercial loan is to generate revenue, make improvements (equipment) or commence new construction development. Generally, these loans have short durations, some have balloon payments and [...]
It's difficult to imagine a time when insurance wasn't an integral part of managing risk for both individuals and businesses alike. But insurance has evolved over the millennia from something we would barely recognize to the products of today. To [...]
Agency due diligence means that you've taken the necessary steps to understand what you're acquiring in an agency acquisition. Any time you purchase an existing business, you're not only acquiring the good: Goodwill Lines of Business Revenues Talent Technology You're [...]
So, you're thinking about the possibilities of owning an insurance agency. Before you make the final decision gather as much information on the prospective purchase and leave nothing to chance. Take advantage of due diligence and hire a professional - [...]
Internal and external economic factors contribute to the health of most organizations. Other elements playing a major role in the insurance market include commerce risks. When you consider all of the possible components affecting the well-being of an insurance agency [...]
Mergers are business tools used for joining resources to develop a larger share of the market by offering consolidated services or expansions into new territories. Given that the insurance industry has several types of products, it’s normal for an independent [...]