Business loan protection

What is business loan protection?

Many businesses have financial liabilities such as commercial loans and mortgages, bank overdrafts, venture capital loans or directors’/personal guarantees loans.

The risk with such arrangements is that the ability to guarantee or repay them can often rest with just a few key people. (Owners may be jointly liable, severally liable or jointly and severally liable). If any of these die or suffer a critical illness, the remaining owners can be left with a large debt that they simply cannot pay. This is particularly the case with a personal guaranteed loan where the guarantor has been lost.

Business loan protection is fundamentally a life assurance policy taken out on the life of key individuals which will pay off the outstanding debt if something happens to them. The sum insured can be paid to either the business or to the lender.