At the same time advisers have raised the need for protection cover to protect them financially following illness or death so the family lose their mortgage and not their home.
So, with a tried and tested business model in the personal market, how much of a stretch would it be for the adviser to extend his reach into the business loan protection market?
For me this sounds like a logical progression if you are an adviser looking at opportunities in the market to grow your business. Ok so business loan protection is a bit different to looking at personal mortgage loan cover, but you have built up all the knowledge and skills needed in the personal market and these could be adapted. It could be a bit of a stepping stone made easier with the plethora of help and support from providers in the business protection market. Providers have invaluable support models for advisers to learn and grow; from providing webinars, technical assistance and support materials, there is everything you need to know about business loan protection that could set you up for success.
And don’t just take it from me, there is a lot of research out there from advisers saying business protection is a real opportunity in the market. But we have probably been saying this for a few years and to be honest we haven’t really seen much of a shift in market size; over the last 5 years the business market growth has been 3.6% according to NMG1 which I think would struggle to be classed as an incremental increase.
What’s different now?
Before lockdown the business market had over half of businesses having some form of debt including business loans. Of these businesses, research by Royal London suggested that just 16% of them had protection insurance to cover the risk of someone in the business being off long-term sick or dying2.
Whilst most businesses were aware that any business loans would be repayable in the event of death, only a small minority of them had sought advice and got some protection cover. Most were ignoring the business risks and a small number had actively decided to self-insure.
But the world has changed. With Coronavirus, many businesses have been struggling to stay afloat and their debts have increased. As part of its response to help protect businesses and the jobs they provide, the Government has introduced schemes for businesses to take out business loans; CBILS (Coronavirus Business Interruption Loan Scheme up to £5million)3 and BBLs (Bounce Back Loans up to £50k)4. Over a million businesses have taken out loans through these schemes5. Along with new borrowing, many are saying it is giving them an opportunity to replace or restructure their current loans or debt arrangements giving the businesses some breathing space. So, although many of the loans could be keeping businesses alive, other businesses may be taking advantage and making savings. And probably now more than ever business owners have become acutely aware that a sudden unexpected event could seriously harm the financial viability of their business.
But where do you start?
Your existing client’s fact find can give you some valuable information like their employment situation; are they employed or self-employed, do they own their own business and how is their income made up – is it a mix of salary and dividends? This could mark them out as suitable for a business loan protection conversation.
Finding out how your client and their business has coped during the coronavirus crisis will help you identify whether they would benefit for some protection advice. Have they taken out one of the Government backed loans? This could signal a potential increase in risk in the business and therefore a need for business loan protection advice. In much the same way you would advise your clients of the need to increase their mortgage protection cover if they moved to a new home and increased their mortgage, now you can provide business protection advice too. Their business could be vulnerable to unexpected events and in business protection terms these events are illness or death of a key person with a tried and tested solution – key person loan / loss of profits protection. These protection solutions are designed to protect businesses. Now could be a good time to contact some of your existing clients or attract new clients by offering financial advice to help get or keep their business on a better financial footing.
At Royal London, we have lots of tools and information on our website that can help. Alternatively, if you want to learn more about business protection and earn CPD, why not catch up on our webinar 'The business protection opportunity – why it’s now even more important'
Alternatively, as a taster, you could try our new ‘Business Protection opportunity’ video
1 - Business Protection and Relevant Life Analysis, UK Protection Programme 2019/2020, NMG
2 - YouGov Plc. Total sample size was 748 senior decision makers at SMEs. Fieldwork was undertaken between 28th October - 1st November 2019. The survey was carried out online. The figures have been weighted and are representative of British business size.
3 - Gov.uk. Apply for a coronavirus Business Interruption Loan Scheme. September 2020
4 - Gov.uk. Apply for a coronavirus Bounce Back Loan. September 2020
5 - Gov.uk. HM Treasury coronavirus (COVID-19) business loan scheme statistics. September 2020.
This article first appeared in Money Marketing.