How to Perpetuate an Independent Agency from Within

Originally published by InsurBanc

Jar with coins leaves growth perpetuation image

Managing an insurance agency in the oil patch of eastern New Mexico, Stacy Reid knew how gas and oil prices challenge clients. She saw the agency she managed as a source of stability and financial strength. But how could she get the deal done to purchase the agency?

From her desk at Hartgraves Insurance Agency, Stacy Reid has seen the ups and downs of the oil business. From its office in downtown Lovington, New Mexico – about 20 miles west of the Texas border – Hartgraves Insurance services the region’s oil and gas producers and service companies.

Managing the agency for five years, Reid has seen premiums spike in tandem with oil prices – and then make a breathtaking ride down. Today, Reid watches over the same agency – but now she’s the enthusiastic owner, having purchased it in September 2008 from the man who hired her, Mike Hartgraves, so that he could retire.

When InsurBanc business development officer Patricia Smith brought the loan request to Robert Pettinicchi, executive vice president and chief lending officer, they saw the agency’s strengths when they first looked at Hartgraves Insurance.

“When there are potential borrowers with strong expertise and knowledge of the insurance needs of their client industries, that’s something we value. We also look for the strengths of the agency’s marketplace, and how their infrastructure can support growth,” said Pettinicchi.

The experience of an agency leader is also vital, he added. “Someone with strong ties to the local community who thoroughly knows the agency operations is a strong competitive advantage. That helps not just in the marketplace. It’s an edge when someone wants to borrow money to buy an agency.”

“The biggest obstacle I faced in purchasing the agency was finding financing options,” Reid recalled. “I tried going to my local bankers with whom I have an established relationship, but soon found out that financing insurance agencies was difficult because of the intangible assets of the [agency] business.

“None of the banks wanted to finance the loan. I considered looking for investors, but I really wanted to maintain 100% ownership and control of the business,” said Reid.

“My local bank had known about InsurBanc through another local insurance agency that had used them. My banker got me the information and I contacted InsurBanc.”

Reid said InsurBanc’s Pattie Smith “was so informative and helpful. She gave me the information on various valuation companies, and we chose Mystic Capital to produce our agency evaluation. After the valuation was done, I started the loan application process, which InsuBanc helped me with every step of the way. They were so knowledgeable about the business of the independent insurance agents. It made it very easy.”

The end result: “I was financed and was able to purchase the agency outright from the retiring owner.”

“The benefits of working with InsurBanc are numerous,” Reid said. “They are so helpful and friendly. They understand the insurance business and that helps to get the funding together. They helped me through every step of the loan process from application to closing. They are still there for any questions that arise. I am using InsurBanc for my deposit accounts, and it couldn't be any easier. They are still just a phone call or e-mail away if I have any banking questions.”

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