Exclusive: More than half of all UK small businesses rely on credit to pay for insurance
Nearly six in ten small business across the UK rely on credit to pay for their insurance, borrowing on average around £1,832, according to new research that was exclusively shared with City PM this weekend.
Some 16 per cent of SMEs claim to be using over £3,000 of credit a year to buy their cover, according to data from finance company Premium Credit.
The firm found that of those companies using credit to pay for their insurance, 20 per cent say they have taken on more credit over the past year for this purpose, but 30 per cent say they have borrowed less.
In terms of the credit being used, 44 per cent are using credit cards, and 34 per cent are using premium finance and/or finance provided by insurers.
Some 15 per cent have used Government funding to buy their cover, but 10 per cent have turned to friends and family to secure the finance needed to pay for their insurance.
Among those businesses using more credit, 50 per cent said it is because of the impact of the Coronavirus crisis, and this is followed by 31 per cent who cite rising insurance premiums. The corresponding figures from April this year were 73 per cent and 36 per cent, respectively.
The study further showed that nearly one in ten SMEs who use credit to pay for their insurance have seen their premiums increase dramatically over the past 12 months, and 47 per cent say they have risen slightly.
In terms of the steps taken by these businesses to combat this, 24 per cent have made cuts to their business to reduce costs, 20 per cent say they have increased their claims excess, and 20 per cent have reduced their level of investment in operations.
Some 18 per cent have reduced their level of insurance cover, 14 per cent have cut salaries, and 13 per cent have also closed parts of their business. Only one in three (36 per cent) say they have taken no action.