Business Loan Protection
What is business loan protection?
Business loan protection is a way of protecting your business should a key person, partner or director die or contract a serious illness.
It can help ensure that your business can continue trading in these circumstances.
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The success of almost all small and medium-sized businesses is dependent on a few people who make a significant contribution.
Loan security
Any outstanding business loans will need to be covered (apportioned between the relevant key people as appropriate). As well as the lender usually requiring this cover, many directors may have given personal guarantees and/or used their own residential home as security, so there is the added need to ensure that dependants are protected.
Directors may well have made loans to the company themselves either by making a cash injection or leaving salary, bonus or dividends in the business. These are known as Director Loan Accounts. On death they become repayable to the estate of the deceased key person and therefore need to be included in the sum assured. On Critical Illness the repayment of such a loan would give the director much needed personal financial security.
In a partnership there may be similar loan accounts owed to individual partners and these need to be covered in the same way.
Ask yourself these questions?
* Does your business rely heavily on one or a few key individuals?
* Could your business survive without those individuals?
* What could go wrong if a director/partner were to die or be diagnosed with a serious illness?
* How would you retain control of the business?
* Do you have a written agreement in place as to what would happen?
If this has raised some questions for you, please contact us for a FREE Business Health Check
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Types of business protection
There are three main kinds of business protection:
- Key Person Protection - continuation planning
- Partner/Director Share Protection - succession planning
- Business Loan Protection
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