People talk about having the right idea as the key to a successful business, but sustaining a company such as an insurance agency really takes two things: an owner who’s willing put in a lot of effort and enough working capital to pursue opportunities.

Working capital, isn’t always well understood — even by experienced agency owners. Too many build businesses with healthy revenues but not enough available capital to pursue the opportunities that present growth potential, such as buying a retiring agent’s book of business, expanding the agency’s staff, or even investing in upgraded technology.

It’s not unusual to see even healthy agencies use a substantial chunk of their monthly revenue to pay off all sorts of business debt. They may have opened a line of credit to buy the office furniture, used a business credit card to purchase computers, and taken a separate loan in the agency’s name to purchase a nice work vehicle … adding up to enough debt service to hamstring them. And much of that debt comes with high interest rates.

Agency owners who are in that situation say things like, “When I finally pay that off, I’ll be able to …” They know debt is holding them back, but they may not realize it’s a structural problem. Given their approach, each payoff is likely to be followed by a new debt, creating a sort of treadmill that wears agency owner’s out without allowing them to make as much progress as they should.

It’s not a hopeless situation, but escaping it requires two steps. First, the agency owner must change their mindset to recognize the value and potential of working capital, so they focus on growing and protecting it. Second, they need to take control of the debt they already have. One solution that can be particularly effective is to consolidate those multiple business debts into a single loan.

Consolidating business debts into a single loan simplifies debt management, so instead of chasing several payments each month, the agency owner makes one payment that’s easier to budget. In addition, the interest rate on a consolidation loan is likely to be lower than many other sources of credit, such as credit cards, a vendor’s credit program, or a bank’s business line of credit, which results in lowering the total interest expense the agent will pay over the life of such debt.

This approach requires a lender who understands the unique economics and revenue streams associated with insurance agencies. Traditional sources such as local banks are more accustomed to collateral-based lending, while specialty lenders such as Oak Street Funding can structure a consolidation against the future cash flows from your book of business. That can free up cash flow, so you can get off the debt treadmill and focus on your long-term growth and security.

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