12/06/13

You Got Your Small Business Loan – What’s Next?

The obvious answer: Open your business, whether it’s a bakery, an alterations shop, a small manufacturing operation or some other venture. Right? Not so fast.

There’s a big step that must come between getting approved for a loan and flinging open your doors. You absolutely must get the right kinds of insurance coverage for your business before you start selling cupcakes or hiring employees or even having an open house.

Chances are your lender will require you demonstrate that you’re properly covered before releasing the money you need. Following are some suggestions for coverage, regardless of what type of venture you’re starting.

Commercial property insurance

Even if you’re renting your space, you still need commercial property insurance. That’s because coverage also applies to your inventory and equipment. That commercial oven you use to bake those cupcakes? It’s worth thousands of dollars. Add in your supplies, display racks, registers, computers, and all the other ingredients to cook up a success and you’ve got a huge investment that you can’t afford to lose.

Think nothing can happen to you? So did thousands of small business owners in the Northeast in fall 2012, about the time Superstorm Sandy came along. Many lost that gamble: Sandy caused $8.9 billion in insured losses involving damage to businesses, according to the Insurance Services Office (ISO).

Despite that reminder of the danger of going uninsured, fewer than 10% of small businesses have taken measures to prepare for disaster since then, according to a 2013 survey by Fedex Corp. and the American Red Cross. The kicker – the Insurance Information Institute (III) estimates that about a quarter of businesses shutter their doors after a major disaster.

Commercial property insurance also offers protection against losses due to small “disasters.” Say hail damages your windows, or fire destroys the building and its contents, or a broken water pipe soaks equipment and vital documents. Standard business property insurance typically covers the following:

The best thing is that you can tailor property coverage to your needs. Take an inventory of what will be in your location and meet with your agent to see whether you should invest in an all-risk policy or a peril-specific one.

Flood insurance

You probably have heard by now. Home insurance policies don’t cover flooding. Neither do commercial property policies. That’s something you’ll have to get separately through the National Flood Insurance Program. One key fact: From 2008 to 2012, the average commercial claim was more than $75,000, according to the NFIP. You can’t wait until there’s a threat to buy coverage – there’s a 30-day waiting period before it goes into effect. Get more information here.

Liability coverage

In a nutshell, liability coverage helps if you get sued. There are several types, including the following:

Other business coverages

There are a number of other business protections you also should consider:

Obviously, that’s a lot to work through as you’re getting ready to open. Many providers offer a Business Owners Policy to combine a number of features in one package. Talk with your agent to make sure a BOP is the right decision for you.

Once you’re definitely covered, you’re one step closer to that grand opening you’ve always dreamed about.

Get more small business tips from Lendio.

About the author

Arthur Murray
Arthur Murray

This article was written by Arthur Murray, a contributor to the HomeownersInsurance.com Homeowners Blog. HomeownersInsurance.com serves as a resource center for insurance consumers and homebuyers across the country.

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