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What Every Business Owner Needs to Know Before Applying For Premium Funding
Published by Brin Hayden | November 25, 2024
Running a business comes with plenty of costs, and insurance premiums are often one of the biggest upfront expenses. Insurance premium funding allows businesses to spread their insurance payments over time, offering greater flexibility.
But before you can take advantage of this solution, it’s important to understand the application process and requirements for premium funding insurance.
Insurance premium funding is a financial arrangement where a lender pays your insurance premiums on your behalf. In exchange, you agree to repay the lender in manageable, often monthly, instalments. This allows your business to avoid large lump-sum payments and maintain healthy cash flow.
For premium funding insurance in Australia, this process typically covers various insurance policies, including general liability, property insurance, workers’ compensation, and more.
To qualify for premium funding insurance, your business must generally be of a certain size and type. Lenders prefer to work with established businesses that have a stable operational history.
For example, small to medium-sized enterprises (SMEs) are often the ideal candidates for insurance premium finance, as they typically face higher insurance premiums but may lack the upfront capital to cover these costs.
Just like any other type of financing, your business creditworthiness plays a key role in securing insurance premium funding. A strong credit history with minimal outstanding debts and a record of on-time payments will boost your chances of approval.
Not all insurance policies qualify for premium funding insurance. Lenders typically require that your insurance policy be with a reputable insurer and that the coverage is suitable for funding.
To assess your ability to repay the premium funding, lenders will need to review your business’s financial health. This often involves submitting financial statements, tax returns, and bank records.
Your history of making timely payments—whether it’s for loans, credit, or even previous insurance premiums—will also factor into your eligibility.
Working with a business finance broker can help you identify lenders who are more flexible with their requirements.
These documents, such as the Profit and Loss (P&L) Statement, Balance Sheet, and Cash Flow Statement, show your business’s financial health.
Recent tax returns (typically the last two years) filed with the ATO verify your business’s income, expenses, and overall financial position.
Provide the details of the insurance policy you wish to finance, including the insurance type, policyholder details, coverage limits, premium amount, and payment frequency.
A government-issued ID (like a driver’s licence or passport) for the business owner or authorised representative is required to verify the applicant’s identity.
Recent bank statements (usually for the past three to six months) show your business’s cash flow and help lenders assess your ability to make repayments.
A credit history report shows how your business has managed previous loans and credit. A solid credit history can improve your chances of securing premium funding insurance.
These documents confirm that your business is legally registered and authorised to operate. You’ll need to provide your ABN or ACN, along with any relevant licensing or permits.
Speak with an insurance broker for business or a lender who specialises in this type of financing. They’ll discuss your insurance needs, premium amount, and repayment options.
Once you’ve chosen a lender or broker, the next step is to submit the required documents mentioned above for evaluation.
Once the lender receives your documents, they’ll assess your premium funding application. They’ll evaluate your business’s financial health, including cash flow, credit history, and stability. They’ll also review the insurance policy.
If the lender approves your application, they’ll present you with a formal offer. This offer will detail:
Once you’ve reviewed and agreed to the terms, you’ll sign the premium funding insurance agreement. This contract outlines your obligations, including the repayment schedule and any fees or penalties.
After signing the agreement, the lender will transfer the funds directly to your insurance provider, paying your premium in full. Your business will then begin making regular repayments to the lender, typically on a monthly or quarterly basis, depending on the agreement.
Qualifying for insurance premium funding doesn’t have to be complicated. Working with a trusted insurance broker like Cabbage Capital can help you find the best options tailored to your business’s needs.
Ready to ease your cash flow with insurance premium funding? Contact Cabbage Capital at +61 418 574 655 or book a meeting for a free consultation.
Founder and principal broker
Brin has over 20 years of experience in logistics, rising to senior management at Victorian Express and co-founding Yellow Express. He focuses on helping small to medium-sized businesses thrive financially, drawing on insights from the GFC. As a devoted family man, he enjoys spending time with his wife and daughter and playing golf.
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