The construction and manufacturing sectors are the most likely to rely on credit to help pay for insurance, analysis from finance company Premium Credit shows.
‘Premium finance’ allows contractors to pay for insurance in monthly instalments, but unlike taking out a credit card or bank loan, a premium finance loan does not affect credit ratings on application.
Construction firms accounted for more than 8% of all net advances from Premium Credit last year ahead of the manufacturing sector which made up 7%. This was followed by transport, professional and scientific, and retail and wholesale. The five sectors together accounted for nearly a third (31%) of all net advances from Premium Credit.
Premium Credit’s data shows SMEs are increasingly borrowing to pay for insurance – total net advances of premium finance for commercial insurance increased by over 11% in 2020 compared with the previous year even though the number of policies only rose marginally.
That is supported by research among SMEs and corporates showing that they are borrowing more to fund business insurance with owners most likely to rely on credit cards. Nearly one in four SME owners and managers who use credit increased the amount they borrowed in the past year, with average additional credit coming to nearly £1,300.
Around three out of four (73%) SME bosses interviewed who use credit to pay for insurance say the impact of Covid-19 is the main reason for increased borrowing but premium rises from insurers were also blamed by 36% of firms.