Most business owners neglect to insure their most important asset … themselves! Let’s talk about why insurance coverage matters.
What you’ll learn
- Business insurance is the best way to be ready for emergencies and protect your legacy
- Most people seek loans and VC funding to fund their recovery, but this type of financing can be expensive or force you to give away partial ownership.
- Build capital for the future by investing in yourself with a smart business insurance policy
- Neither VC nor loans really help in emergencies, but insurance provides exactly the funds you need when you need them
- Insurance makes sure your business has the capital and a plan to survive the unexpected
The coronavirus brought unprecedented challenges and changes for businesses of all sizes. At the same time, this worldwide pandemic reinforced an age-old piece of business wisdom: You must be prepared for everything. Entrepreneurial success relies on your business’s ability to adapt and overcome all types of obstacles.
Business insurance is key to that planning. In this post, we’ll look at the importance of insurance and why you shouldn’t rely on sources of funding — such as loans and venture capital — to cover you in an emergency.
Venture capital vs. business insurance
Venture capital can be critical when you’re trying to get a new business off the ground, but it’s not the right way to plan for emergencies. Giving up a piece of your business in exchange for capital doesn’t prepare your business for future emergencies or unplanned obstacles. Negotiation from a position of injury, when you’re in dire need of money, compromises your ability to make a good deal.
In contrast, insurance provides capital when you need it most — in the event of a disaster. With coverage, you won’t need to give away a piece of your business to overcome a temporary setback.
Loans versus business insurance
Loans are another way some businesses try to get the capital they need to meet challenges, but you typically have to submit very detailed plans to the lender (plans that may not sound like good investments), and you’ll continue to make payments even if your business has waning cash flow.
Insurance, in contrast, kicks in when you need it the most, and many insurance plans let you borrow money without having to apply or explain how you’re using the funds.
Use your PPP to find the right business insurance for your company!
The Paycheck Protection Program (PPP) provided countless businesses with capital injections, and most of these loans were forgivable as long as you spent at least 60% of it on payroll, which includes insurance premiums for group healthcare benefits.
The remaining 40% can be used on critical expenses, including insurance premiums. The Internal Revenue Service (IRS) has also ruled that businesses don’t have to report the proceeds of forgiven PPP loans as business revenue, but they can still deduct expenses paid with them from business income.
3 more ways insurance protects your business
- Business insurance protects continuity: Small businesses rely on their human capital. If a partner dies or is disabled, the business may not be able to go on. An insurance policy creates new ways to handle this situation, providing funds that can be used to hire additional help or acquire shares from the heirs.
- Business insurance minimizes risk: Insurance also helps minimize risks. Liability insurance protects your business against the threat of a lawsuit. Business loan coverage steps in and helps if your business suffers a reduction in revenue and can’t pay its debts. Other options cover cybersecurity breaches, theft, natural disasters, business income losses, workers’ compensation, and more.
- Business insurance protects opportunity costs: Taking money from cash reserves to cover things like capital investments can compromise your ability to invest the funds or maintain a cushion for cash flow emergencies. Businesses that leverage insurance for financing can keep their cash reserves intact and still maintain the option of applying for other financing when opportunities arise.
Don’t let opportunities pass you by or risks take you under. Protect your business with the right insurance policies. To get connected to the best insurers for your needs, check out our site, contact us directly for assistance, or download the app. Also, sign up for a free consultation with Fortis Lux for a full small business financial check-up.
At Capital Connectors, we work closely with small businesses to help them find the capital and other resources they need to thrive and survive.