EF summer 08.indd - National Association of Professional Allstate ...

Purchasing an Allstate agency is a
tremendous decision, and knowing what
your lender is looking for can help you
secure the best financing terms available.
Allstate agency loans are structured dif-
8 P
levels
ferently than home mortgages so application
requirements are very different.
There are many ways in which you can
begin preparing for a successful loan approval
in advance of contacting a lender.
1. Check your credit. As a general
rule you should review your credit report
at least once a year to make sure
your identity has not been compromised.
Additionally, you should check
your credit report before applying for
a loan. The Federal Trade Commission
requires each of the three credit reporting
agencies to provide consumers with
a free copy of their credit report once
each year. One central Website, approved
by the FTC has been set up for
this purpose. You can visit www.annualcreditreport.com,
call 1-877-322-8228,
or complete the Annual Credit Report
Request Form and mail it to: Annual
Credit Report Request Service, P.O.
Box 105281, Atlanta, GA 30348-5281.
The form can be downloaded from the
FTC’s Web site at ftc.gov/credit. It’s
difficult to believe that a $70 utility bill
from a year ago would have much effect
on your credit rating, but even a seemingly
small item like this can drastically
affect your score. Verifying that your
balances, payment history, and social
security number are all correct is crucial.
Staying up-to-date with your credit rating
will allow you to be prepared for
any questions your lender may have and
could ultimately save thousands of dollars
by securing a lower interest rate.
2. Avoid credit card debt. High
business tips
8 Tips for Securing Your
Allstate Agency Loan
BY PAUL CLARKE
of credit card debt are viewed
unfavorably from a lender’s perspective.
It’s unfortunate when you have years of
proven experience, a thriving agency,
and an agency with a favorable cash
flow, but are faced with a higher interest
rate or possibly a declination due to
high levels of credit card debt. Maintaining
a revolving credit card balance
below $25,000 will go a long way in
helping secure a favorable loan. Lenders
will likely have some tough questions if
you let your balance increase much over
this amount. Keeping your credit card
balances below 30 percent of your available
limit will also reflect well on your
credit report.
3. Be careful about what you buy. It
may be tempting to purchase that new
Mercedes, or a big boat, but the amount
of debt you have incurred will directly affect
the amount of money that you can
borrow. When a lender analyzes your
loan, they factor in all current obligations
such as mortgage, automobile, and
credit card payments. Lenders also like
to see a net worth that is 25% or greater
than the total loan request. You may have
found the perfect agency to purchase, but
if you have high living expense needs the
agency simply may not be able to provide
the cash flow that you need.
4. Be fiscally responsible. Although
there is no hard and fast rule that you
must adhere to in regard to your personal
finances, it is important to realize that, to
some extent, your personal financial statement
is interpreted as a reflection of your
character. Individuals with responsible and
well managed finances show that they
have discipline, an important attribute in
maintaining a successful agency. Bankers
want to feel comfortable that, when they
make a loan, they will receive timely payments
and a responsible financial statement
helps to create this assurance.
5. Take your time: Purchasing an
agency is a very big decision. Make
sure that you have allowed yourself
plenty of time to make the best choice
for you and your family. Will you still be
happy with your agency five, ten, or fifteen
years down the road Eventually the
honeymoon ends and the reality of your
decision will set in, so be sure that you’re
selecting the right agency. Ask yourself
if you are buying this agency because
it is really something that you want to
do and will allow you to improve your
quality of life. Are you considering this
purchase just because the opportunity
arose Perhaps you’ve found something
in the perfect location, but it’s the
wrong agency. It can be easy to get carried
away and follow an impulse, so take
time to step back and think about your
decision. Most agents will only purchase
one agency in their lifetime – so
don’t rush into something that you may
regret for years to come.
6. Understand the business. Borrowing
money for an Allstate agency
is very different than securing a home
mortgage loan. When you purchase an
Allstate agency the lender is extending
you a large amount of money without
any tangible assets as collateral. Instead,
the bank is lending to you based on the
qualifications of your business skill and
ownership ability. Familiarizing yourself
with the business operations and
the numbers involved with the agency
you are looking to purchase creates a
very good impression with a lender. It is
a good idea to keep in mind some important
benchmarks that affect the RFG
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