Friday, August 13, 2010

Insuring Small Business Risk

Entrepreneur insurance - really?

That was my reaction when I heard about a new insurance product that indemnifies small business founders and investors from personal loss when they take out commercial debt.

With the blisteringly high failure rates for small business, it has always taken a strong constitution and high levels of risk tolerance to open a business. But in the past, one could get a bank loan and limit personal risk if a business was established and had a good chance for growth.

Not so anymore. Personal guarantees, once reserved for startups and those with shaky financial backgrounds, are now de rigueur for any business owner seeking a loan - no matter how stable and successful their businesses are.

Enter Asterisk Financial, the subject of my Q&A this week. Its founders have developed a new-fangled product that pays half of the personal loss for policyholders who have signed personal guarantees and then defaulted on their business loans.

An innovative idea, and one that would probably not be possible (or necessary) outside of the current credit crisis.


  1. Sounds like an idea whose time has come.

  2. Seems like this would be ripe for all sorts of shenanigans. Off the top of my head, I can think of two easy scams.