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Agency Financing Case Studies

Case #10: A Nearly 200-Year-Old Agency Takes Steps to Preserve Its Independence


Summary: Chase, Clarke, Stewart & Fontana, one of the oldest and largest insurance agencies in Springfield, Massachusetts, faced a dilemma: how to stay independent when two of its partners were retiring. Could the agency afford to buy out both partners at the same time? As it turns out, it could, thanks to timely financing from InsurBanc, a division of Connecticut Community Bank NA.


Chase, Clarke, Stewart & Fontana is a full-service insurance agency in Springfield, Massachusetts, with a history that dates back to 1827. Over the years, CCSF has grown through the acquisition of smaller local agencies, always keeping its roots in the community and maintaining its independence.

In 2017, CCSF found itself at a crossroads. Two of its five partners were nearing the agency’s mandatory retirement age of 66, and CCSF’s bylaws required that they retire their shares in the company.

As partner Ray Lukas explains, “We had been able to buy out retiring partners before, either through bank financing or an internal buyout, but we had never been faced with two retirements. We weren’t sure we could do it. How would we handle the partners’ clients, and could we afford to do a buyout?”

At the same time, CCSF knew there were large national brokerages which expressed interest in purchasing smaller agencies, and the multiples were attractive. While selling to a larger firm would allow the partners to maximize their earnings, CCSF also wanted to explore options that could keep the agency independent.

Prior to starting his own agency, which merged with CCSF in 2004, Lukas worked for a large financial services company in Boston. “I knew what it was like to work in a cubicle, where the only thing that matters are the numbers, you don’t have an identity and you aren’t in control of your destiny,” he says. “That weighed on my mind as we discussed the agency’s future.”

In the end, CCSF was able to come up with a perpetuation plan that was favorable to everyone involved. “We raised the acquisition price for an internal buyout to make it more appealing for the retiring partners, plus we offered a two-year brokerage agreement,” Lukas says. “Then we set out to see if we could get the financing.”


‘InsurBanc spoke our language’

Lukas turned right away to InsurBanc. “I had always heard good things about InsurBanc,” he says. “I felt with a commercial lender I’d be spending a lot of time explaining the basics of the insurance business, so I thought InsurBanc was the right place to start.

“From day one, it was just what I thought,” he continues. “InsurBanc knew our business model. They spoke our language, and they saw how our cash flow could generate the funds to pay off the loan. They made it easy and responded in a very timely manner.

Scott Freiday, vice president and commercial team leader at InsurBanc, says that once the remaining owners decided they wanted to remain independent, “The loan needed to be underwritten quickly to show the retiring principals that capital was available. This is what we do every day, allowing agencies to maintain an independent legacy rather than selling out to one of the larger brokers. Our extensive knowledge of the agency business permits us to deliver solutions with a minimum of fuss. It’s also a credit to Ray, who was able to readily provide all the information we needed to do our due diligence.”

“InsurBanc showed us how we could do the financing and remain independent,” Lukas adds. “It stepped up with enough funding for both buyouts, although we only needed it for one since we funded the other one internally. I am certain that if we had used a commercial bank, the process would have taken longer. InsurBanc really understands how agencies work.”


Perpetuating a legacy

Remaining independent preserved CCSF’s rich history and its close ties to the community. CCSF has been continuously located in downtown Springfield since its inception in 1827. CCSF employees are active on boards and volunteer in local charitable organizations, and the agency sponsors community events and scholarships for local students each year.

“Lifestyle was my number one reason for wanting to remain independent,” says Lukas. “Eventually you figure out what’s important in life. The money and stress aren’t worth it compared to the freedom and flexibility that comes with owning an independent agency. The satisfaction of building a team and growing an organization outweighs the ‘big money’ of selling to a national broker.”

Lukas and his partners see a bright future for CCSF. Once the agency has emerged from its current transition, he hopes to convince a few other independent agents in the area to join the firm as he did. “I’d like to think that we could grow through acquisition and help out some other agents who are solo and may benefit from being part of our organization. We hope to be there for them in the years ahead.”



Case #9: Ascend Insurance Brokerage: Insurance Exec with a Musical Heart Triumphs over Tragedy

Summary: Ascend Insurance Brokerage, a Texas-based firm, has carved out a national niche in entertainment risks. But long before its now-owner could enter the insurance business — and later buy out a retiring partner using guidance and funding from InsurBanc, a division of Connecticut Community Bank, N.A — he had to overcome a tragedy that struck a band he managed.

Paul Bassman might be the most aptly named insurance executive of all time: Rather like the bassist providing a song’s solid backdrop, he lays down the financial foundation so the show can go on in the music business.

In past careers — as a band manager, concert promoter, label owner, and talent scout — Bassman found out what it took to develop artists whose music would make a lasting impression.

Bassman also learned, the hard way, that unex­pected events can derail a performance and even a career. It was heartache, in fact, that drove him out of the music business when the lead singer of a heavy metal band he managed tragically died at a concert in Ohio.

But Bassman’s empathy for musicians drew him back to the business. After taking stock of his future, he joined fellow music buff James Chippendale in 2007 to serve artists and entertainment venues in a new way in the insurance world. Today Bassman stands as the principal of Ascend Insurance Brokerage, the firm he acquired in 2016 from his partner upon Chippendale’s retirement.

“My clients absolutely love that I know their business. I get it, I can talk their language,” Bassman told Billboard magazine. “I feel their pain. I know how insurance is an afterthought. When I was in management, insurance was a line item on a budget that I questioned. I remember clearly talking to my business managers going: ‘What’s this insurance thing, do we really need this? What could possibly happen?’”

Today his hard-earned experience shapes his advice to clients. “I’ve been there,” he says. “I know damn well what can happen, and I can talk to them about it. I say, ‘Guys, protect your assets.’”

Bassman fiercely protects those clients — the brick-and-mortar venues, promoters, artists and bands who want to put together memorable entertainment events. Ascend’s blend of experience, coverage and service has been a repeat hit in the entertainment world — with clients who manage such festivals as Life is Beautiful, Lollapalooza, Governor’s Ball NYC and Austin City Limits, as well as concert promoters Bowery Presents, C3 Presents and others.

Ascend also has led the music business in a national safety campaign. A stage collapse at the Indiana State Fair in 2011 led the firm to help form the Event Safety Alliance, a non-profit that outlines best practices for live entertainment events. Not only does it make the entertainment world safer, but it improves the risk profiles of Ascend’s customers.

“If you can make the industry more highly educated and certify that level of confidence, everyone benefits …,” states Bassman. “When you make it safer, the reward is to make it cheaper for clients.”

With four producers and staff of 20, Bassman’s team taps 50 carrier markets. His ambition is “to continue to have a high percentage growth rate and an expansion into a broader array of client risk management services.”

When it came time to transfer ownership from Chippendale (who himself had bought out another partner in 2013), Ascend turned to InsurBanc. “Because of the banking relationship and knowledge of the industry, we went to them to secure funding” to refinance existing debt and create a new transfer of ownership, recounts Bassman.

Ascend originally began banking with InsurBanc in 2009 when management wanted “a bank that we perceived understood our industry,” recalls Bassman. “Why it worked was they understood what we were trying to do.” With a previous transaction based on a buyout funded by the seller, Ascend approached InsurBanc seeking to “wrap up all the old debt into one note.”

“It was difficult. [But] InsurBanc made it easy because we had a working relationship. They listened to us,” Bassman explains. For the transaction, he says, “They were very easy to work with. We started the work with people within InsurBanc that we had already been working with. They’re in Connecticut, we’re in Texas. We’ve never met personally.”

“Just like we have clients all across North America who pick us for our specialty, we picked InsurBanc because of their specialty in the insurance world,” comments Bassman. “The end result is that now we are poised with a very liquid footing, with a bank relationship that we can count on going forward.”


Case #8: BNC Insurance Agency: Construction Specialist Agency Puts on New Addition

Summary: Two captive agents who shared an office started BNC Insurance Agency from scratch in 2000 to gain access to a wider choice of carriers and advocacy for their clients. Adding people and products, the two agency principals grew the agency into a “Best Practices” firm with a specialty in construction insurance and risk management. The firm recently purchased a peer agency using guidance and funding from InsurBanc, a division of Connecticut Community Bank, N.A.®

With more than 600 clients in its construction insurance practice, it makes sense that BNC Insurance Agency of Rye Brook, N.Y., would be skilled at designing and planning an addition.

Indeed, the firm’s deal to add an agency worked out just the way the firm drew it up: BNC’s fall 2014 acquisition of a peer firm went off without redesign or regret. The independent agency worked with InsurBanc to gain financing for the agency acquisition.

“As far as acquisitions go it worked out very well,” recounted Brian Colby of BNC Insurance, who started BNC in 2000 along with partner Onofrio (“Noff”) Colabella. The business partners, who shared an office when they both worked for a captive insurer, formed BNC to gain wider access to product and carrier choice, better advocacy for clients, and to develop and deliver additional value-added products and resources to clients.

The transaction made sense in a number of ways: BNC was located just 10 miles away from the acquired firm, which was formed in 1947 and based in the nearby New York suburb of New Rochelle, N.Y. The two firms also had in common a construction insurance specialty and an agency technology system.

“We are a growth-oriented firm,” pointed out Colby. “And there really are only a couple ways you can grow: You can either grow organically or you can grow inorganically. The organic part, which is from within—that’s what we have been doing through the years.”

With more than 50 staff, including seven producers, it’s the “sales culture” of the firm that drives success, said Colby. “We are all in our own way, shape or form looking to grow the company through sales. It just streams throughout the entire company.”

“I think the real key for us is constant planning, measuring our results and adjusting to make sure we meet our goals,” Colby pointed out.

Colby explained: “A huge piece of our growth has been in our niche, which is our construction division, by far our largest unit.” The agency also enjoys a diversified book of commercial lines business (which makes up 75 percent of revenues) along with personal lines and employee benefits clients. “We’re very in tune to how to write construction in New York. We are deeply entrenched in the construction associations as well as the deliverables needed to set us apart. We represent just about every carrier out there that is writing construction in the New York area.”

But the agency leaders wanted more growth, and saw a good opportunity with their recent acquisition. The scale of it, though, required the facilitation of external financing, because it brought a 40 percent addition to BNC’s revenues. The firm also sought a bank line of credit for working capital.

“I knew [InsurBanc] specialized in lending to the M&A marketplace for insurance agencies” from seeing trade magazine ads and speaking to others in the industry, explained Colby. Having earlier met David Tralka, InsurBanc’s CEO, at an industry conference, Colby turned to him when exploring how to finance the acquisition. “We reached out to four or five lenders and had conversations with them prior to making a final decision to move forward with InsurBanc.”

The lending officers at InsurBanc were “fantastic from day one,” commented Colby. “We just really connected from the start. What I did notice from InsurBanc is they are very much in tune with the independent insurance agent, and they know what to look for in an insurance operation when they are underwriting a loan. This is something most commercial banks don’t understand.”

Added Colby: “The terms that InsurBanc brought forward to us were extremely competitive.”

With the acquisition in the rear-view mirror—along with a complicated process of combining two firms with different legal structures—BNC aims for further growth, both through organic growth and acquisition. “For our next acquisition, InsurBanc will be the first call I’m making. They really do a great job,” emphasized Colby.

“The team that we worked with over there was really on the money with everything. If there were any questions I had, they answered them right away. I knew if I sent them an email with a question, within two hours I had the exact answer I needed. And they really understood what to look for. They asked some really, really good questions when they underwrote the loan. The process was great. On the other side, having our financials in good order was also a key factor in moving the process along in a timely manner so that we could provide them with the information they needed.”


Case #7: At Roger Keith & Sons, the Family Agency Still Grows Strong in 5th Generation

Summary: From its start in 1869, Roger Keith and Sons is now in its fifth generation of ownership. Yet this suburban Boston independent agency does not rest on its laurels from years gone by: It responds to market forces and uses keen financial and agency management to generate new growth. Today its leadership team combines organic growth, acquisitions, and a niche for sustained success – with the help of a bank that specializes in helping agencies.

Success brings longevity. But longevity brings unprecedented challenges unheard of in past eras. The lesson for owners of independent agencies is that change and flexibility are essential to generate further growth.

Roger Keith & Sons, an independent agency operating in Brockton, Mass., was founded in 1869 and continues today in its fifth generation of ownership. But Donovan Dunn, president and CEO, said the independent agency must follow new paths to sustain success. An agency principal needs to be proactive about revenue growth, agency operations, and agency finance in light of today’s economic environment.

“Everyone is thinking differently about the way businesses are operated and the environment is much more competitive,” said Dunn. “We have to work harder than ever to earn and retain customers. I think the U.S. recession has had a significant impact over the last five years, and the belief that the insurance industry was ‘recession-proof’ proved incorrect.”

Dunn and co-principal Sherry Meadows both were agents when they acquired the firm in 2007 (from his father-in-law and her father, Robert Meadows). This newest generation of ownership has led the agency during one of the most turbulent financial times in the nation’s financial history. Since the purchase, Dunn reported: “We have merged with or acquired six books of business and continue to look for opportunities that fit our specific growth strategy.”

Funding Acquisitions

The agency’s strong book of business spread among personal lines (27 percent), commercial lines (63 percent), and life and health insurance (10 percent)—along with a specialty in medical professional coverages—provided the firm with a strong revenue base. But Dunn saw the impact of the recession. “We had been funding the acquisitions via cash flow, and as the economy turned and commission income receded, it became challenging to continue to look for opportunities while containing our current expenses,” he pointed out.

The silver lining of the most-recent financial cloud, though, was an improvement in interest rates. This presented an opportunity to refinance the agency’s acquisition debt at more favorable terms. But Dunn didn’t just want a new loan from any source. He turned to InsurBanc, a division of Connecticut Community Bank, for financing, coming highly recommended within the independent agent community.

New Perspective

“I was looking for an innovative way to consolidate our debt, allow for flexible cash management and give me the means to continue to grow via merger and acquisition,” said Dunn. “After receiving proposals from our existing bank, it was apparent it didn’t have a true sense of what the value of an agency is.

“After speaking with InsurBanc, I had a totally different perspective on what a lender could do for us. The solution fit our initiatives perfectly,” Dunn said. Knowing that InsurBanc understood our business made the process much easier. It’s reassuring to have a banker as knowledgeable as they are.”

Roger Keith & Sons chose a term loan from InsurBanc to refinance its existing debt and obtained a credit line for working capital. The agency also brought its full business banking relationship to InsurBanc for cash management, and gained access to online banking and remote deposit tools to streamline operations.

“Coupling banking with insurance agency expertise was what sold me on InsurBanc. The relationship has been fantastic thus far,” Dunn said.

M&A Opportunities

Roger Keith & Sons now has a partner in financial management that provides not only financial capital but intellectual capital. “More than ever now, we need that flexibility to react quickly when an opportunity presents itself,” stated Dunn. “And it is great to know that you can discuss potential M&A opportunities with your banker without their eyes glazing over. To have InsurBanc as an ally is a valuable asset.”

“I feel I can rely on them for that additional expertise they possess in regards to the agency component of the insurance industry,” he added. “Merger and acquisition activity will continue to be a critical piece to our growth initiative, and I do not feel a local community bank can have the same perspective or responsiveness as InsurBanc.”


Case #6: From CSR to Owner, Deb Buckley Takes It One Goal At a Time

Summary: 28 years after joining independent agency Goss & McLain in 1976, Deb Buckley purchased the firm. Her journey from CSR to owner is distinguished by a “can do” attitude, a view toward the next goal, and a focus on people. Her latest accomplishments: Paying off the debt to acquire the agency, and buying a building in Holyoke, Mass. to house the growing firm.

Deborah Buckley joined the Goss & McLain Insurance Agency in 1976, a young college graduate who heard about a job for a customer service representative “requiring no experience.” Her thought: “I said: ‘I have no experience. I could do that!’” She ditched a waitressing job and joined a business she knew little about, other than the positive review that a neighbor who worked there told her.

That “can do” attitude has taken Buckley on a 36-year career journey through every part in the agency, all the way to ownership. She is proud of the sticking power of her 12 employees: “If you look at our average longevity, we’re about at 18 years. We have a couple of new people, but some have been here more than 30 years. That’s important. There’s lot of consistency here. Our clients appreciate that.”

“It’s not just insurance alone,” Buckley pointed out. “The fact that we’ve been successful in this community for so long speaks to the relevance of service we provide. That is why we’re still here and we’re so successful. There are certain things that are important to us: Educating our employees and having everybody hold a broker’s license.”

Established in 1879, Goss & McLain has strong ties in the western Massachusetts town of Holyoke and surrounding counties north of Springfield. “We have a huge investment in the community. It’s apparent by the number of outside boards I serve on and other people in the agency serve on. That goes a long way towards our success,” she explained.

The agency’s book is 60 percent commercial lines with the balance in personal lines. Subspecialties in medical malpractice and nonprofit organizations combined make up 30 percent of the business.

Earning Trust

While she had no family ties to create a predetermined path to ownership, Buckley earned the trust of owner Donald McLain, being appointed as executive vice president in 1988 and taking over day-to-day operations; and then as president in 2000.

Her thoughts turned to ownership during that period. Buckley explained: “Around 2003 we started conversations around the actual purchase” on an exploratory basis and got an agency valuation. “We worked very collaboratively towards it. I never really felt like we were on opposite sides of the table,” she stated, adding that the mutual feeling was to structure a transaction that “worked for both of us.”

At the time of the closing of the acquisition in 2004, Buckley recalled, the seller’s attorney commented: “This is the way it was meant to be.” The relationship between seller and buyer, combined with a sound agency perpetuation plan and a bank that understood the insurance agency business, made it work for all parties.

Funding Partner

After achieving her goal of agency ownership, Buckley set her sights on next one. After buying the agency with funding provided by InsurBanc, paying off the loan was her objective. She faithfully repaid the loan and the next goal was buying a building for the agency, which had outgrown the space it had occupied since 1984.

An expiring lease added urgency. Buckley made an offer on a medical office in a prime business location. Unoccupied for five years, it needed top-to-bottom renovations. But the mild winter of 2012 in Massachusetts allowed contractors to add a new roof and remodel the interior space of 4,500 square feet in just three months.

“InsurBanc financed the purchase and renovations,” Buckley said. “The place is absolutely gorgeous now. People walk through it and cannot believe what this building is like.”

InsurBanc played a vital role not just in providing funding but understanding the independent agency business model. “Trying to find a bank that understands the insurance business is not an easy process,” Buckley commented. “Dealing with InsurBanc from the beginning was so easy. When you talk about ease of doing business—that is what it was like dealing with InsurBanc.”

“They asked all the right questions because they understood the value of an insurance agency. They understood the value of an expiration list. They looked at our track record and the fact that I had been with the agency since 1976 and managed it for the prior 15 years. They were willing to finance the agency for me.”

Buckley stated: “Every year my accountant would tell me: ‘You could go to any bank and get financing.’ But loyalty is a two-way street. When I was a new business owner, InsurBanc provided the initial financing. When it came time to finance the building, I didn’t even approach anyone else. I just went back to InsurBanc.”

Buckley added: “I wouldn’t have changed the bank. I think InsurBanc did a great job and continues to do a great job for us. I can’t even imagine at any point switching banks.”


Case #5: Renaissance Group Turns To InsurBanc To Help Member Agencies Do Many Things Well

Summary: Renaissance Alliance, a network of independent insurance agencies in New England, provides specialty services for 85 member agencies. Renaissance turned to InsurBanc for a customized commission payment system, cash management services and online banking.

J. Bruce Cochrane, CIC, president of Renaissance Alliance Insurance Services, LLC, knows that independent agency owners must do many things well in order to succeed: Prospect, sell, and service—plus run an efficient operation.

Cochrane—who was an agency principal for two decades with Cochrane and Porter Insurance Agency, Inc, a family-owned independent agency in Massachusetts—has a passion for helping owners make their agencies the best they can be.

“We make life simpler for independent agencies by doing things centrally for them, without taking away their independent nature as local firms,” explained Cochrane.

He formed Renaissance Alliance in 1999 as a network of specialized services. Renaissance offers a range of resources to its 85 member agencies: Preferred access to more than 35 carrier markets and service providers, along with administrative and technology services. The goal is to help agencies enhance profits and grow—while allowing them to retain independent, local presences. Combined, the member agencies write $363 million of insurance premiums.

Both diligent and cautious, Cochrane is open to bringing new resources to his members. He was intrigued when he learned of InsurBanc’s specialization in lending and cash management for independent agencies. Like Renaissance Alliance, InsurBanc provides a unique set of capabilities and services to independent agencies to help make them more efficient and boost profitability.

The relationship between the firms began with InsurBanc’s assessment of Renaissance’s cash flows and assets, banking needs and growth objectives. InsurBanc developed a customized banking program for Renaissance that combined technology tools, deposit products and services, and customer service standards and processes.

InsurBanc created a customized electronic system that allows Renaissance to efficiently pay insurance commissions to members via bank wire or electronic funds transfer. InsurBanc provided Renaissance Alliance with cash management products and services as well as online banking tools (including a remote deposit system for delivering checks to the bank without leaving the office).

The professional analysis and complete solution developed for his firm made InsurBanc a good fit with Renaissance, Cochrane noted. The electronic payment system gives Renaissance the capability to directly pay its member agencies three times monthly on a timelier basis than previously possible, creating efficiencies and revenue enhancement for members.

“Working with independent agencies as a service provider requires us to understand the psyche of the independent agency owner. This is where we and InsurBanc have parallels. InsurBanc provides banking products that fit the specific needs of agencies—and their commitment to customer service matches up well with Renaissance Alliance,” explained Cochrane.

Like many InsurBanc clients, Renaissance Alliance wants to focus on what it does best and rely on a banking partner that understands its needs, provides relevant products, and backs it all up with technology and customer service.

InsurBanc’s service philosophy and operations resemble those of an independent agency. InsurBanc provides agencies with two advantages: First, the bankers at InsurBanc understand the operations and cash-flow patterns of independent agencies; and second, the bank can readily assess the needs of an agency and create an individualized suite of products and services.

Cochrane said: “It’s very comforting for an independent agent to be able to talk with a banker about the specialized banking needs of the insurance business. Few bankers can understand, even conceptually, the terminology and business practices of independent agencies. By working with InsurBanc, the agent does not to have to explain the insurance business.”

Cochrane’s career has been marked by creativity: He pioneered several insurance innovations, including some of the first group property/liability programs in New England, as well as risk-funding alternatives including group captives, ‘rent-a-captives’ and self-insured groups. But this innovator is old-fashioned when it comes to service. “The differentiator in reviewing our banking products and services was personal service,” said Cochrane. “Renaissance Alliance is built on excellent customer service, and that is increasingly tough to find in banks at the national or regional level.

“It was critical for us to get to know the people at InsurBanc and understand what InsurBanc’s philosophy was with personal service. What convinced us to move our banking relationship to InsurBanc was the bank’s commitment from the top down to assist us if we did run into a problem,” he said.

“With customer service, we have been extremely pleased with InsurBanc since we came on board. Where we’ve had a potential issue it’s been resolved quickly and efficiently. The reporting system through the InsurBanc Web site is excellent, responsive, and logical—which you don’t necessarily always find,” Cochrane stated.

“InsurBanc is being what a bank should be to their customers. There is only one bank we would recommend to agents and that is InsurBanc.”


Case #2: John Rost Finds Adventure in the Huge Hispanic Market

Summary: Reaching the summit of Mt. Everest in 2004 was a peak experience for John Rost. Returning to the insurance business, he took on a new challenge: building a national insurance brand in the 45-million-strong Hispanic marketplace.

“Adventure Guy.” That’s the nickname John Rost took with him to the summit of Mt. Everest in 2004. When he reached the peak, he became only the 35th American to climb the Seven Summits—the tallest mountain on each of the seven continents.

Returning to sea level in southern California, Rost resumed his life as a successful agency owner. Starting in 1999, he had built an agency from scratch—Fiesta Auto Insurance—serving the expanding Hispanic marketplace in his adopted hometown of Los Angeles.

But the entrepreneur in this adventurer dreamed of more: he wanted to build a franchise that would reach well beyond his locations in southern California to serve the nationwide Hispanic market of 45 million people. More fond of marketing and sales than of agency management, Rost longed to empower people in agencies by getting them to own a piece of the business.

Rost—who admired food franchise firms such as Subway—decided to apply the concepts of turn-key franchising to Fiesta Auto Insurance. He had the idea—plus the market, the carrier relationships, the paperless agency management system, and years of success on an agency level. But he needed time and money to establish his company as a franchisor.

‘Significant Investment’ Required

“California has very high standards for franchisors,” Rost explained. “We are required to meet certain capital requirements and also required to have audited financial statements. This process required a significant financial investment.”

That’s where InsurBanc came in. Few banks or potential investors understood his agency’s operations, and fewer understood his dream of franchising an insurance retail storefront. Based on Rost’s success in the independent agency business, InsurBanc stepped in to provide a line of credit to give Fiesta the working capital to build out the franchise concept and start up its first franchised locations.

Without InsurBanc, Rost recalled, he would have been forced to “look at private investment or grow at a slower rate.” Why did he decide to work with InsurBanc? Rost answered simply: “They understand the insurance industry. It is beneficial having a bank that actually understands the uniqueness of the insurance business.”

Owner Eyes Growth

After securing his initial franchise approval in California in 2006, Rost added individual franchisees in 32 locations around the state. Later gaining Federal Trade Commission approval as a franchisor, he added locations in Texas, New York, Missouri, Michigan, Florida and Pennsylvania. And with the aim of a national presence, Fiesta has secured franchise approvals in 42 states.

Each Fiesta Auto Insurance franchise is locally operated, and offers auto, home, business, rental property, boat, and motorcycle coverages from as many as 55 carriers. In addition every franchise location operates as an income tax preparation site in the tax season. Fiesta offers customers instant refunds and electronic filing just like other tax only franchises. And the part that Rost likes most is that owners are running every location. “We want them to operate as independently as possible,” commented Rost. “This is true business ownership.”

Each new franchisee pays an upfront fee for licensing, and pays a commission split on sales. Each location gets an exclusive territory. Fiesta gives each location its proprietary Web-based agency management system, access to insurance carriers, errors and omissions coverage, franchise branding resources and full time accounting support. Fiesta holds franchisees to written standards for production, procedures, and customer service.

Rost’s adventurous lifetime also has included automobile racing, surfing, yachting, tennis, hunting, fishing, and scuba diving. An avid private pilot, he has owned and piloted a sport aerobatic airplane. In 2006 -2007 he built his own high performance aircraft in his garage. And in June 2009 he set a new world speed record in the aircraft that he built. Those extreme sports aren’t for everyone—but Rost has learned there’s something that is: insurance and income tax preparation.

“These are financial products that truly every adult in the United States needs to have,” Rost explained. And he’s ready to serve a huge piece of the market through his Fiesta Auto Insurance franchise. And the insurance professionals in the Hispanic market like it: Fiesta was named the Latin American Agents Association “Agency of the Year” for 2007.


Case #1: Stacy Reid Rises Up At Hartgraves Insurance

Summary: 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.

During her time as the agency owner, Reid knows more than ever that the agency’s fortunes are closely tied to the economy and, more directly, the oil market.

“When oil prices go down, my business goes down,” Reid stated. “With 70-80 percent of our business coming from companies based in the oil and gas industry, and our premiums based on their gross receipts, the price of oil directly impacts our business.”

The commercial client base of the six-person Hartgraves agency is largely drilling and service companies throughout West Texas and eastern New Mexico. It’s a strong niche, as the nearest competitor is 20 miles distant. Farmers, ranchers, municipalities and the service industries make up the balance of the commercial lines for this property/casualty agency. They also offer personal lines and financial services products. The agency’s 35-year history in the region with these industries gives it a competitive foothold, even during declines in oil prices as has happened in late 2008.

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.”