Protecting Business Debt

Are you protecting your key business assets—like your debts?

Many business owners who don’t have debt protection insurance in place say they simply never knew they could insure their debts or never had a conversation with their accountant about 'how much the business really owed them and what they should do about it.

  • Insuring your debts is a lot like insuring your working assets - in accountants speak - debts are considered assets

Regardless of whether you're a new business, just starting out or growing your business with a clear exit strategy in site for the coming years - you still need to protect the assets that drive the profit and revenue. (Remember in accounting cash is referred to as an asset because it's a resource you can use in your business operations).

Show me the money

At some point, most businesses will borrow money from a financial institution or a company director or both. This might be to provide the business with a capital injection for a major purchase or expansion or simply a source of working capital.

  • Having the right debt insurance in place means that you’ll have the funds to reduce or repay any business debt (and importantly safeguard any funds the business owns you as a director or shareholder) and protect your personal assets from being seized to pay business debts, should one of the insurance events take place.

Business debt protection

Nothing can cripple, or even sink, a business faster than a creditor launching a legal action to recall an unpaid commercial loan or a demand under a loan guarantee. The consequences are often far reaching beyond the business and impact the owner's families, shareholders, directors, other creditors and even the stability of the staff.

Business debt protection is designed to help remove or substantially pay down business loans in the event that a business owner passes away or suffers a serious disability. It's a risk that every business regardless of size, must protect against.

Johns Story

Most businesses owe the director money.

This was the case for John who started his family run wholesale food distribution business 6 years ago. Rather than take a full wage he decided to leave most of the profits in the company as Owners Funds, (learnt to the company by the director to help grow the business and lower the costs of running a bank overdraft account).

  • Over the years John's accountant calculated the company debt to the company Director was $500,000.

One day John wants to take those funds out of the business but until then, to protect himself and his family, John’s company took out two types of life insurance policies naming John as beneficiary, each for $500,000 to cover the outstanding balance owing to John and his family.

They were:

  • Life insurance $500,000 - paying out if John were to pass away unexpectedly or suffer a terminal illness.
  • Medical crisis insurance for $500,000 - paying out if John were to suffer a listed medical crisis event and be unable to continue to work.

How much does your business owe you?

Most small business owners either lend money to the business or leave unclaimed wages in the business to help its cashflow. Keeping track of the money your business owns you is normally done in a paper entry in the financial accounts called, an owner's account.

  • Do you have a Owners Loan Account with a significant amount of value owned to you?
  • Is it protected by an insurance policy where you are named as the beneficiary
  • Or will it be lost to you and your family if you suffer one of the insurable events?

It's time to talk to Sapience about safeguarding what's rightfully owned to you and your family. Better be safe than sorry.

Contact us today here to see if we can help you get your business debt protected.
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