So I heard someone in the office today talking to a prospect about their SBA loans approval chance will increase if they get life insurance. Did some digging and some website said SBA requires life insurance as collateral?
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Life insurance is often required as collateral. While it may not improve your chances of approval, it is usually necessary to complete the process.
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What’s the question? I encounter this situation frequently. For example, someone going through a divorce may have a decree that requires them to get coverage. They make great prospects because they must buy the insurance, even if they don’t really want to pay for it.
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Like do you need life insurance for SBA loans?
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Most bank loans require some form of insurance on the borrower if there isn’t physical collateral being pledged.
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I can’t speak for all the loan types the SBA offers, but I had a 504 loan to buy real estate and operate an owner-occupied business. I was definitely required to have life insurance. I don’t remember the exact requirements, but the type, length, and death benefit amount are likely determined by the loan type and the loan amount.