Insurance World

Many people who wish to start their own business need an injection of financial capital at the beginning of a business; the main source of funding for entrepreneurs is business loans.

Let’s take a look at what you should expect if you plan to apply for one.

First of all, you should know that most lenders have their doubts when it comes to lending money to a first-time business owner. You’re considered a high business risk at this point, and you should go in to your loan negotiations armed with a few advantages. Of course, the ideal option is to run your business for a few years, even just out of your home, and turn a good profit before approaching a bank for a loan.

That shows that you have the ability to make money and that your business won’t flop before the Open sign shows up on the door. But if this isn’t possible, if you need the cash before you can begin at all, then chances are you will need to offer some type of collateral. Collateral can be anything from your car to your home and everything in between. Depending on the size of the loan, you may require some pretty hard assets for collateral. The lender is not interested in whether or not your business will make money, aside from the extent that will allow you to pay them back on time. They simply don’t want to lose out on the loan, and so you’ll have to find some way to back yourself up.

Backing up your loan with assets, if you have them, is a good route - provided you have enough confidence in your financial situation to ensure you are not going to lose your collateral. If you don’t have enough assets to stand in for your loan, another option is to find a cosigner. Chances are you won’t get as much cash as you would if you had the assets. But having someone with good credit who is willing to sign onto your loan and promise to pay if you don’t can be the factor that gets you through the door. This is a good way for friends and family who believe in your business to help you get it off the ground, even if they don’t have the money to loan you up front.

When it’s time to borrow, do some comparison-shopping among banks and credit associations, and don’t stop until you find the lowest interest rate possible. You’re already gambling a lot here- minimize the amount you will have to pay back by doing your homework and choosing the company that offers you the best deal. If you can’t get enough to cover your beginning business expenses, consider borrowing part of the cash from a friend or relative if you can, or even asking for investors, such as customers who believe in your business, to help out. Don’t accept a high-rate, high-risk business loan just because it offers you the biggest amount.

The small business loan: The first step in a long chain of financial events. If you take the right step, it could be your leap into the business world.

Many people today have a small amount of life insurance as a benefit of employment; however, it is seldom sufficient to provide for total family protection, college education, or business coverage in the event of premature death.

To cover these financial needs people buy individually underwritten life insurance from the private market in different amounts and at different times throughout their life. People seeking this protection are free to choose when to buy, what to buy, and how much to pay for coverage. They can buy when they are young and healthy, or wait until middle age hoping their health will stay good, or they can buy at a higher premium if they develop a chronic illness.

Based on their financial portfolio and coverage needs, they can choose products ranging from an inexpensive term insurance product to high cash value (whole life) product. The private life insurance system provides an important financial safety net, but it is entirely voluntary and unsubsidized. An individual life insurance policy is, in effect, a commercial transaction in which the insurer agrees to pay a specified death benefit in exchange for payment of a premium proportional to the mortality risk assumed by the insurer.

The one characteristic common to all individual life insurance products is transfer of the financial loss caused by unexpected death to the life insurance company. The real product is payment of the death benefit regardless of when that death occurs during the lifetime of the product. The death benefit for each individual far exceeds annual and cumulative premiums plus earnings for several years, particularly for young applicants.

To offer this financial protection, the company must be able to identify and distinguish the risks each applicant poses, assess these risks, charge the appropriate premium to cover the risks, and invest wisely so that sufficient moneys exist to pay all present and future claims. Different groups of insured’s with different life expectations must be distinct based on real differences in mortality expectation.

Life expectancy varies by age, gender, medical and family histories, avocation, and lifestyle. Applicants for life insurance have different medical histories and risk factors for future disease that affect life expectancy. Each group of insurance underwriters is charged a premium sufficient to cover costs associated wt its expected rate of death. The primary task of an underwriter is to assess life expectancy based on medical, occupational a vocational factors significant to life expectancy.

It is vital that the insurer have a full understanding, and particularly the same knowledge, as the applicant in order to assess accurately that risk equitably.
Before offering coverage to an applicant, life insurers attempt to identify factors that may shorten the person’s usual life expectancy at a given age. If identifiable risks exist, the underwriter uses actuarial and medical information to calculate life expectancy and determine an appropriate premium.

There are many different types of life insurance products and their particular features play different roles in determining the price of each one. Because life expectancy is defined as the age at which half the insured’s will have died, it’s a moving target that increases with the age of the individual at the time of application.