Buying an Insurance Agency

Anonymous · ‎05-25-2015

Let me start by saying at the age of 33 I finally started to care about my credit score. Before then I got by just fine paying cash or doing buy here pay here Cars. Well something happened between 2008 and 2010. I got divorced and realized if I wanted the life I deserved I needed to start making some head way. In 2011 I went out and found a company to give me a auto loan (CNAC) out of Indiana. They pulled my credit and it was anything but a thing of beauty. Mid 400's tons and of bad stuff. I've been working on it ever since. My last scores from what I can tell still aren't where I need them. 609,608 and 597. I have been hand picked from my boss to buy an existing insurance agency and the problem is I need to finance the book for him to get out of the loan without penalty. I've still got a few collection accounts on my record for 2010, and one kinda recent utility reporting from 18 months ago for unreturned equipment. I've got and maintain a 100% on time payment history for the past 4 years but my credit score is still very low. I've got 5 revolving account (4 credit cards and finger hut) (two cards with a $500 credit line, one credit card with a 600 and recently my wife added me to her credit card with a 1300) ( fingerhut has a $2k limit with a $1k balance). 2 installment loans ( motorcylce and truck ). I've got about 5 credit pulls reporting on each bureau. Does anyone know where an insurance company wants your credit score to finance a book of business and what else can I do to boost my score?

Anonymous · ‎05-25-2015

I know nothing about buying an insurance business, but from the limited info you posted, I get a bad vibe about the deal your boss is proposing. Why did he choose you? Why is he is selling / wants out early? Is the book of business really worth the value of the outstanding loan? Lots of questions to consider before signing anything.

You already have 3+ revolvers and loans, so you're good there. The collection accounts, especially those that are credit card charge offs, are holding down your scores. Till those are all gone, don't expect any rapid boosts. You can get to around 700 with baddies, but it will likely take a year or more from where you're at right now.

Settling the debts can help, since many creditors will then stop updating monthly. Updating keeps scores depressed. Midland is among the worst in this regard. Conversely, sometimes not paying is better for a collection that's not updated in years. Ideally, paying all debt off is best, but not realistic for many with limited finances. There are numerous strategies for attacking collections. Start with reading the post http://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/Frequently-Requested-Threads/m-p/224981 to get a feel for the various terminology (DV, PFD, OC, JDB, OC, GW, etc), and approaches to try.

Anonymous · ‎05-25-2015

I've done my research. I've been working for him for about 3 years now. He benefits from selling and building new agencies. And I benefit by having a stable base pay. Over all it's a win win for us both if I can get my score where I need it at. I've been in the works to by for a year now. Original plan was me buying in August of 2017 and my timeline jumped to buying in January of 2016. Hence why I'm overly aggressively looking to repair my credit the rest of the way as fast as possible.

Anonymous · ‎05-25-2015

I used to be in the insurance business. What type of agency are you looking into buying? You're wanting stable pay? But in the insurance business you eventually have to turn the wheel and sell policies because depending on your contract some agencies want you to service existing policies for FREE for one year. So where will your income/commissions come from duro g this time. I'm assuming you've ran the numbers for profits.

Anonymous · ‎05-25-2015

I've ran the numbers and then reran them at this point. I will be an exclusive agent. Because of the contract I will get 30% on new business and 10% on renewals. I make good money now but I'm peaked out currently at about $90k a year. Not bad given I'm just a LSP. So to hit the next level of income I need to buy. I'm excited about the opportunity but I'm not sure what score the company will pull for the loan nor how soon they will pull it.

Anonymous · ‎05-25-2015

It will all depend on what's on your credit report. For example with Farmers you can't have collections of more than 3k and typically they want you to have about 60k or one year of decent salary in liquid. This is just one example. Each agency will have their own requirements so it's best you talk to someone in their underwriting department.

Anonymous · ‎05-25-2015

They want bank statements for 60 days showing $50k which I have to provide at the beginning of September when I interview. So the collections thing is good to know. With farmers is it paid or unpaid collections that you cannot have?

Anonymous · ‎05-25-2015

Unpaid. But again, you will go through manual underwriting when these red flags come up. It sounds like you've got a little bit of time to work on this so head over to the "rebuilding your credit " section to get help with any derogs in your reports. Review your recent 3B report from here and go over all the negatives bringing your score down. Good luck! It's a great time to be in the insurance industry.

dethkultur · ‎05-26-2015

@Anonymous wrote:
Let me start by saying at the age of 33 I finally started to care about my credit score. Before then I got by just fine paying cash or doing buy here pay here Cars. Well something happened between 2008 and 2010. I got divorced and realized if I wanted the life I deserved I needed to start making some head way. In 2011 I went out and found a company to give me a auto loan (CNAC) out of Indiana. They pulled my credit and it was anything but a thing of beauty. Mid 400's tons and of bad stuff. I've been working on it ever since. My last scores from what I can tell still aren't where I need them. 609,608 and 597. I have been hand picked from my boss to buy an existing insurance agency and the problem is I need to finance the book for him to get out of the loan without penalty. I've still got a few collection accounts on my record for 2010, and one kinda recent utility reporting from 18 months ago for unreturned equipment. I've got and maintain a 100% on time payment history for the past 4 years but my credit score is still very low. I've got 5 revolving account (4 credit cards and finger hut) (two cards with a $500 credit line, one credit card with a 600 and recently my wife added me to her credit card with a 1300) ( fingerhut has a $2k limit with a $1k balance). 2 installment loans ( motorcylce and truck ). I've got about 5 credit pulls reporting on each bureau. Does anyone know where an insurance company wants your credit score to finance a book of business and what else can I do to boost my score?

If your boss thinks you are a stud, he'll finance the purchase for you, at least until you can line up financing. If he is just looking to to get cash and have someone else assume the risk, then I wouldn't feel too special being "hand picked." In a small business it is very, very normal for the former owner to stay involved, and for the buyer to be able to back out if all is not as advertised.

I've started and sold several businesses, so I'm all for someone taking the chance if they want that life, even a reckless chance, because there are some things you don't learn in business until you are burnt. It's true that every successful business person has numerous failures behind them. It's a catch 22. Usually, going broke or loan defaults are part of those stories.

Don't let he pull and allure of an opportunity overwhelm your brain. The numbers won't care about your desire. If your boss that thinks you are awesome but invents some excuse why you aren't awesome enough to have skin in the game with you, then step back and talk to some old timers you have around you with some scars from the business world.

Anonymous · ‎05-26-2015

Ironically i couldn't agree more. With that being said the "$50k" that I am required to show in the bank for 60days, $47k of it is being provided by him. So backing wise he is doing his part. Anytime you give away $47k you have to want that person to succeed. Calling it what it is. The life Insurance requirement changes once a book becomes 3 years old. He is selling it before it hits 3 years old to avoid that requirement. In addition the company will only allow a book to be split if it is all being sold. I'm buying a very small portion of the book to capture the highest advance commission and eliminate my life goal for 3 years as well.