SME use of premium finance grows as average loan reaches £1,600

The amount that SMEs are borrowing from credit providers to cover their insurance costs has nearly doubled over the past year, up to £1,600 on average from £820 in 2024.

This is according to new data, released today (2 December 2025), by premium finance firm Premium Credit.

The main reason for increasing their borrowing was the convenience of doing so compared to paying out of pocket, with 44% of respondents to a survey highlighting this reason.

Increases in insurance premiums, selected by 37% of surveyees, and higher costs of materials, selected by 35%, were also meaningful contributors to the trend.

The research also found that SMEs predominantly value premium finance for its ability to allow them to pay monthly, with 49% of SMEs reporting so.

The number of SMEs using premium finance or finance provided by insurers has also grown in recent years. Indeed, the percentage of SMEs that use credit to fund their operations that use insurance-based credit products has grown to 62%, up from 44% in 2024 and 33% in 2023.

Convenience over cost

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 the cost of insurance.”