Small and medium-sized enterprises (SMEs) are increasing their use of credit to fund insurance, with convenience emerging as the primary driver rather than rising premiums, research from Premium Credit has found.
Premium Credit’s latest Insurance Index found that one in three SMEs using credit for insurance have borrowed more in the past year than the year before.
The average amount borrowed rose to £1,600, nearly double the £820 recorded last year and higher than the £1,100 reported two years ago.
44% of SMEs said convenience was the main reason for borrowing more, followed by 37% citing higher premiums and 35% pointing to rising material costs.
Nearly half of SMEs valued the option to pay for insurance monthly through premium finance or insurer-provided credit, including 19% who used it for all bills.
Two in five said that monthly payments supported budgeting, while one in three noted improved cashflow.
The research highlighted a shift towards premium finance and insurer credit, with 62% of SMEs using these options compared with 44% last year and 33% two years ago.
Credit card use edged down to 44% from 49%, while 28% used personal or business loans, up from 22% last year.
Access to credit has become more challenging for some firms, with 23% reporting greater difficulty in securing finance, compared with 10% a year earlier.
Premium Credit also reported that 22% of SMEs were unable to claim for property or belongings in the past five years because they either lacked insurance or their cover was insufficient, up from 15% last year.
Of those unable to claim, 38% faced losses of £3,000 or more.
Owen Thomas, chief sales officer at Premium Credit, said: “SMEs are borrowing more to pay for insurance but convenience rather than the rising cost of premiums is the main reason for the increase in borrowing.
“Credit can play a role in supporting business growth by enabling firms to better manage cash flow and invest money elsewhere, with substantial numbers of firms using credit to ensure they maintain important insurance cover.
“The research demonstrates that premium finance and finance offered by insurers are playing a growing role in providing credit to SMEs to help with for the cost of insurance.”
