With one-third of commercial insurance premiums in Australia now being funded, it’s clear that the importance of premium funding is growing. Insurance is an obligatory and necessary part of running a business, but the often large costs involved can sometimes cause financial stress. 

Premium funding works to reduce this stress. Where, ordinarily, a business would pay their insurance premium upfront in one lump payment, through the use of a premium funder, you have the option of paying smaller, more manageable monthly instalments. The premium funder will pay the insurance premium for you, and you pay them back in regular instalments to avoid that one lump sum payment. 

There are many benefits to premium funding, as we will see, and they all work towards a more profitable business model for you, with higher chance of success and growth. 


Free up business cash flow 

Inadequate cash flow can often be the final straw for a small business. By spreading out insurance payments, you can keep more funds in your business. Smaller, regular monthly instalments allow for budgeting, viable business planning and less financial stress, and the increased cash flow can get things moving again. 

Premium funding will mean your business has consistent capital on hand, rather than playing catch-up after a big payment. It allows you to put more money back into the business. 


Allowing room for growth

With increased cash flow and more capital being put back into the business, you are setting yourself up to allow more growth in your business. You can reinvest the cash you have on hand to hire additional temporary staff or get new equipment for a new big client. If you have your cash tied up in payments, you may have to bow out of a new profitable client and give in to your competitors. 

Increased cash flow allows you to diversify your product range and strengthen your client base, leading to overall growth and expansion for your business. It increases your opportunities to expand your business model and how you make money, allowing for a higher chance of success down the line. 

Premium funding allows a business to grow from where they are now, rather than playing catch-up after a big payment or dreading the upcoming annual insurance bill. 


Adequate insurance coverage

It can be tempting for small businesses to select a cheaper insurance policy to avoid large premiums, but this means they aren’t adequately covered should something happen. The option for premium funding allows businesses to take out adequate insurance coverage, with the knowledge that they don’t have to pay the larger premium upfront. Premium funding increases affordability of insurance – a vital part of any business model. 

An adequate insurance policy is paramount to the success of any business, but can seem so out of reach to so many small businesses. Premium funding is an excellent tool to ensure your business is protected should something happen, and to avoid unrecoverable losses. 


Other benefits 

Premium funding is safe and secure, and won’t affect your other credit arrangements or loans. Interest rates are usually tax deductible – and fixed rates protect small businesses from fluctuating interest rates. 

With premium funding freeing up some cash flow, there comes increased flexibility. No longer stuck in the rigidity of planning for, and recovering from, a large annual insurance premium payment, a business will have additional flexibility in the way they can plan and invest their money. 

The importance of peace of mind cannot be overstated. As a business owner, it can be stressful to consider upcoming payments, and wonder where the cash will be coming from. Premium funding offers peace of mind to businesses, allowing them to adequately plan for upcoming payments, much smaller and more manageable than their insurance premium lump sum would be. For small business owners with a million things on their mind, insurance premium funding means there’s one less thing to stress about.


Talk to a broker today

Premium funding is a simple but hugely helpful option that many Australian businesses utilise. It’s a great way of avoiding high upfront costs which could otherwise impact growth and the future of a business, while ensuring an adequate level of business insurance cover is maintained. Premium funding allows a business to fulfill financial requirements and insurance obligations without putting themselves under financial strain. 

Talk to your GSK Insurance broker in Perth to see how insurance premium funding can help transform your business, and encourage growth and success in your business model. 


August 25, 2021

By Graham Knight

Founder and Managing Director of GSK Insurance (established in 1981). Graham draws upon more than 50 years’ experience in the insurance industry, working in both insurance and broking across various private, public and government sectors in Australia.

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