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Managing cash flow and budgets is an ongoing task for businesses that often involves challenges around large annual and unexpected expenses, and/or revenue gaps. Paying business insurance premiums at renewal time can present a significant drain on resources and liquidity — but there is an alternative to lump sum payments: premium funding.
Insurance premium funding is a simple, fixed rate loan that enables a business to spread the cost of their insurance over a year instead of paying upfront. Here we look at the main features of premium funding and some of the most commonly asked questions about what's involved.
If you're unable to pay your premiums upfront or want to retain working capital for business operations you can opt to spread your annual premium payments over a year, broken down into monthly payments.
A monthly payment schedule gives you the flexibility to retain cash flow and liquidity so that you're better positioned to meet demands of unexpected outlays.
This is a financing option that your business insurance broker can arrange with the premium funding provider and insurer, for approved clients. Eligibility criteria include a commercial credit check on your operation and potentially the need for financial statements to be provided, depending on the size of the loan.
Unlike a bank credit facility obtaining premium funding does not require security, so your business and personal assets remain unencumbered.
As with other types of financial credit there is an interest cost for funding business insurance premiums. The precise rate is based on factors such as the size of premium, tenure of the loan and how many instalments may be paid upfront.
Almost all business premiums can be funded. The exception is the premium for surety programs, which are excluded.
Not long at all. Once the paperwork is complete, the process is usually swift — you will be able to set up your premium funding arrangement within 24 to 48 hours.
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