Rent deposit insurance commercial comparison
Rental deposit insurance & rental deposit guarantee providers for companies and businesses in comparison
Commercial rent deposit insurance is the smartest solution for many businesses. Which advantages it offers and which contract designs there are, you read in this councellor. We explain the individual options of the deposit and what impact they will have on the liquidity of the company.
The most important thing in a nutshell:
- Traditional bail bond options put a strain on companies in terms of liquidity or potential line of credit.
- Rental deposit insurance for business premises and commercial premises preserves liquidity and has no impact on possible borrowing by the company.
- Rent deposit insurance (rent deposit guarantees) is particularly suitable for start-ups that are dependent on liquid funds.
- This policy is a cover note issued by the insurer to the landlord.
Rent deposit guarantee commercial comparison
In the case of bail for residential real estate, the legislator has made clear regulations. The deposit may amount to a maximum of three months' cold rent. If the tenant provides a rental deposit account or deposits the deposit in cash, it must bear interest. The tenant is entitled to.
The situation is different with the deposit for a commercial property. The amount can be agreed individually between tenant and landlord. A deposit payment for the amount of six or twelve months' rent is not uncommon. In addition, the landlord does not have to pay interest on the deposit. Everyone can imagine what a burden a rental deposit of only six months' rent would be for the company.
The different bail options
In addition to rent deposit insurance for companies, there are two other alternatives. One is the rental deposit, the other is the rental deposit account.
The rent guarantee
While rental security deposits continue to play a major role in the residential sector, surety bonds are more likely to take hold in the commercial sector. This is a bank guarantee. The guarantee is similar in nature to the granting of a loan. It first requires a credit check of the tenant. There is nothing wrong with this in principle. However, it will be added to the company's credit line.
Let's assume a small company that, according to its balance sheet and profit-and-loss statement, is liable for a loan of 200.000 Euro would be "good. The monthly rent is 3.000 euros, the landlord wants six months' rent, 18.000 Euro, as a deposit. If the bank takes over the rent deposit, this reduces the credit line of the company by 18.000 euros. 182 for investment loans.000 euros in question. For the guarantee, an annual guarantee commission and a one-time fee for the issuance of the certificate are due.
The disadvantage of the guarantee becomes clear at this point. It limits the financial flexibility of the entrepreneur.
The rent deposit account
Suppose a person wants to start his own business. However, he cannot run his business from home, but needs commercial premises. We remain with our example of the rent deposit in the amount of 18.000 euros. A start-up usually needs every penny to get off the ground. Would be 18.000 euros tied up in a security deposit account, this would have a massive impact on liquidity. Required money would have to be financed. The interest on the loan in turn reduces the profit, which is necessary especially in the first years to be able to invest further. This is the only way to ensure growth beyond the start-up phase.
The rental deposit account is the most unfortunate solution when starting a self-employed business. Taking out a loan to finance the rental deposit, the so-called deposit loan, is also ruled out due to the interest burden and the repayment. Only advantage would be, is the credit repaid, the money is cost-neutral on the deposit account.
Another disadvantage lies in the duration of repayment. The lessor may well take three or six months to process the application. Usually waits for the annual statement for the apportionments. The old lease is terminated, the new landlord wants a deposit. The funds for this have not yet been released by the old landlord. A classic problem.
The rental deposit insurance for companies
If the options for providing a rental deposit shown so far are rather disadvantageous, what are the advantages of rental deposit insurance??
With the rent deposit insurance for trade stands in the first place also a credit check. This is what it has in common with the guarantee. If the credit check is positive, the insurer assumes liability to the landlord. In this respect, too, it is initially no different from a rent guarantee by a bank. The bank's guarantee commission is offset by the insurance premium for the insurer.
The creditworthiness check depends on the scope and thus also on the time frame of whether it is a partnership or a legal entity. It is obvious that it is concluded more quickly when a founder opens a hair salon alone than when an online agency operates as a limited liability company with several shareholders.
The main difference is that rental deposit insurance does not restrict the company's credit line. Consequently, it enables the tenant to always take advantage of the largest possible investment volume from the bank's point of view.
Special features of rental deposit insurance
The rental deposit insurance in the commercial sector has some special features compared to the residential variant. Policies for private individuals are usually maximized. Depending on the provider, the upper limits are between 6.000 Euro and 10.000 euros. This is not the case in the commercial sector. However, the insurance conditions are up to a certain upper limit, usually 20.000 Euro standardized. If the sum insured exceeds these standard limits, the contracts are agreed individually. The application form of the insurer must give way to the blank letterhead with the individual contract.
The fact is that the rent deposit insurance compared to the other deposit variants both the liquidity and the credit line, thus also liquidity preserves.
Rental deposit insurance despite Schufa?
This question is quite justified in connection with the credit check. However, the answer to this question cannot be generalized. With the interpretation of the Schufa entries with a security deposit insurance it behaves like with an installment credit.
Insurers apply different standards in the case of negative Schufa entries with a minor cause. What is an absolute no-go for one company may be tolerated by another insurer. With individually agreed contracts, this can be reflected in the premium.
The four approaches in the comparison
Before we look in detail at how the rental deposit insurance works, let's compare the advantages and disadvantages of the four options again.
| Implementation path | Per | Contra |
| Rent deposit savings account | – | Commits capital, does not earn interest. |
| Rent guarantee of the bank | Does not tie up capital. | Restricts the credit line by the amount of the surety bond. Costs for issuing the certificate and the annual guarantee commission. |
| Rent deposit loan | Does not tie up any capital, after repayment of the loan the deposit amount is on the deposit account without any costs. | Additional credit burden, which limits especially starters financially. Credit line is reduced by the amount of the deposit credit. |
| Rent deposit insurance | Does not tie up capital, does not affect the credit line. From a certain deposit amount, the conditions are agreed individually. | Cost of the insurance premium. |
The advantages for the landlord
Landlords can prescribe the type of deposit to be made. You can accept a rental deposit insurance, but you do not have to. However, rent deposit insurance for landlords does offer advantages:
- No custody of a rent deposit savings book.
- Already carried out by third parties credit assessment of the future tenant.
- Promise of benefits from a reputable insurance company.
- No administrative burden.
How rental deposit insurance works for companies and businesses
The insurer checks the creditworthiness of the applicant. If the application is accepted, the tenant immediately has a document at hand vis-A-vis the landlord regarding his positive credit rating. It is advisable to apply for rental security deposit insurance in advance so that you can present the credit certificate right away during the initial meeting with the landlord. The amount insured can still be adjusted afterwards. The insurance premium is based on the amount of the security deposit.
The insurer undertakes to the landlord to pay for possible claims covered by the security deposit insurance policy. This may be necessary repairs to the rental property. Outstanding receivables from apportionment payments now also fall under it.
The tenancy comes to an end, the landlord files a claim with the insurer. The insurer now sets a deadline for the policyholder to take a stand. If the landlord's claims are justified, the tenant again receives a deadline to repair the damage, respectively to pay outstanding bills.
If he does not comply with this requirement, the insurer settles the claim against the landlord. Subsequently takes recourse to its policyholder.
If the tenancy ends without the landlord wanting to claim on the insurance, the policy also ends automatically on that date. The policyholder only has to inform the insurer of this fact. If the tenant continues with a new tenancy, he can easily have the rental deposit insurance transferred to it.