Small Business SBA Hazard Loan Insurance is a must. The U.S. Small Business Administration issued requirements for SBA Loans insurance guidelines. Small businesses in California need to carry business insurance. Some states might require a separate mandatory Earthquake or Flood Insurance. California businesses must also carry Workers’ Compensation Insurance when they have even one employee.
Small Business SBA Hazard Loan Insurance
Loan proceeds can finance existing or new improvements on a leasehold interest in land. Therefore the underlying ground lease must include, at a minimum, detailed clauses addressing Lender’s or assignee’s right to hazard insurance proceeds resulting from damage to improvements.
Real Estate Business Insurance
Insurance coverage must be in the amount of the full replacement cost. Also, if full replacement cost insurance not available must be for the maximum insurable value. Furthermore, the insurance coverage must contain a MORTGAGEE CLAUSE in favor of lender. Clause must provide any action or failure to act by mortgagor or owner of insured property will not invalidate interest of lender. Finally, Insurance Policy or Endorsements must provide 10 days prior written notice to lender of cancellation.
Personal Property Business Insurance
Insurance coverage must be for full replacement cost. If full replacement cost insurance not available, coverage must be for maximum insurable value. Also, insurance coverage must contain a LENDER’S LOSS PAYABLE CLAUSE in favor of lender. In addition, clause must provide any action or failure to act by debtor or owner of insured property will not invalidate interest of lender. Policy or endorsements must provide at least 10 days prior written notice to lender of cancellation.
If lender does not require hazard insurance (for example, if it would impose an undue burden on a borrower given the small size of a loan), the lender must document the reason in its loan file.
Marine Business Insurance
Insurance coverage in amount of full insurable value on vessel(s) with lender designated as “Mortgagee” must be obtained when the vessel is collateral on the loan. Also, the policy must contain Mortgagee clause providing interest of lender will not be invalidated by any: act, omission, or negligence of mortgagor, owner, master, agent or crew of insured vessel;
–Failure to comply with any warranty or condition out of mortgagee’s control; or
–Change in title, ownership or management of the vessel.
–Policy must include Protection & Indemnity, Breach of Warranty, & Pollution coverage.
–Policy or endorsements must provide at least 10 days prior written notice to lender of policy cancellation.
Flood Business Insurance
SBA flood insurance requirements based on the Standard Flood Hazard Determination. Policies for units will consist of separate policies obtained by individual unit owner for the particular unit & condominium or cooperative association for exterior of entire building. Any portion of a building collateral for loan located in special flood hazard area, lender must require Borrower to obtain F/I. Also, if any equipment, fixtures or inventory that is collateral for the loan (“Personal Property Collateral”) in a building, any portion located in a SFHA and that building is collateral for the loan, lender must require Borrower to also obtain flood insurance for the Personal Property Collateral under the NFIP
Other Business Insurance
Lender must include any other insurance appropriate to the loan, including but not limited to:
1. Liability Insurance 2. Product Liability Insurance 3. Dram Shop/Host Liquor Liability Insurance 4. Malpractice Insurance 5. Disability Insurance 6. Workers Compensation Insurance 7. Any State specific insurance requirements