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Loans Insurance plan may be alternative to SBA Program

SOLANA BEACH , A Solana Beach firm has come up with a new insurance program for commercial loans that may make more money available to small businesses, a company executive said.

Business-Backers, along with Kempes, a subsidiary of the Kemper Insurance Cos., officially launched the program Jan. 25, said Vic Calise, vice president of Business-Backers.

He called the insurance program a private-sector alternative to the Small Business Administration’s 7(a) loan guarantee program.

“We can issue this policy to the bank and the bank turns around and puts the insurance on the loan if they think it’s needed,” Calise said.

The collateral value protection insurance, or CVPI, covers the principal balance remaining at the date of the loan default, he said. It’s intended for fully amortized loans up to $500,000 for working capital, equipment and other business purposes, he said.

Rancho Bernardo Community Bank has already signed up for the program, he said. It joins 18 other banks in California, Colorado and Wisconsin that signed up before the official launching, Calise said. His company is in the process of signing up several banks in Orange and Los Angeles counties as well, he said.


– Promotions Include Lessons For Bankers

Business-Backers’ marketing strategy for the insurance program is to have independent sales representatives based in various states call on bankers in their area and try to put together seminars explaining the insurance to them, he added.

The insurance program costs the borrower 3 percent of the loan amount during the first year. After that, the annual premium amount declines.

Business-Backers was started about three years ago by Larry Prosi, a local banker, and Steve Appel, a former partner of the Arthur Andersen accounting company. The 11-person Solana Beach firm also has offices in Milwaukee and Columbus, Ohio.

Alan Douglas, president of Rancho Bernardo Community Bank, said the insurance is a good private-sector alternative to the SBA loan guarantee program, particularly in cases where a loan is being refinanced.

“If a company has an SBA loan already and a new lender tries to refinance the loan, the original lender has the option to bump the other guy out of the picture and do the refinancing,” Douglas said. “With this loan insurance program, we can refinance the original loan without that happening.”


– Bank Is Ready To Try Program

While the bank signed up for the insurance program in September 2000, it has yet to make a loan that uses the insurance, he said.

“I think there is a very definite niche for this type of insurance program and there are many circumstances that preclude doing an SBA loan where you could turn to these guys for insurance.”

Susan Banashek, a spokeswoman for the California Bankers Association in San Francisco, said the concept of private commercial loan insurance is a good one. She declined to endorse Business-Backers because she wasn’t familiar with the new company.

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