Businesses
UK SMEs Turn to Premium Finance as Insurance Borrowing Rises
14 Oct 2026
New research from Premium Credit finds that 90% of UK SMEs use some form of credit to pay for insurance, while the average amount borrowed has risen 10% in six months to £2,140.
14 October 2026 — UK small and medium-sized businesses are relying increasingly on credit to keep insurance affordable, with 64% using premium finance or finance provided by insurers, according to new research from Premium Credit.
The company’s latest Insurance Index, based on independent research among 1,000 SME owners and managers, found that 90% of firms use some form of credit to pay for at least one insurance policy.
The average amount borrowed to pay for insurance has also increased, rising 10% in the past six months from £1,945 to £2,140. Premium Credit says the figure has almost doubled compared with two years ago, when the average amount borrowed stood at £1,080.
Premium finance becomes a major funding route
Premium finance is now the most commonly cited form of borrowing for insurance among the SMEs surveyed.
Nearly two-thirds, 64%, said they use premium finance or finance provided directly by insurers. That compares with 60% using credit cards and 34% relying on personal or business loans.
The findings suggest that SMEs are increasingly treating insurance costs as part of their working-capital planning rather than paying annual premiums entirely upfront.
Owen Thomas, Chief Sales Officer at Premium Credit, said:
Credit is essential to ensuring SMEs can pay for insurance, with the overwhelming majority of firms using some form of credit to pay for one or more policies, and the average amount borrowed increasing.
He added that spreading costs into monthly payments can help businesses avoid tying up large amounts of working capital at once.
Insurance borrowing is rising across multiple policy types
Credit use is widespread across different forms of business insurance.
According to the study, 70% of SMEs use credit to pay for vehicle insurance, while 63% use it for property insurance and 48% use credit to fund cyber insurance.
Nearly six in 10 businesses, 59%, said they have increased their use of credit during the past year, while 10% said they are borrowing significantly more.
That increase comes despite signs that some commercial insurance premiums have begun to ease.
Most SMEs still report higher premiums
Although pricing conditions may be becoming less severe in some parts of the market, many SMEs say they are still dealing with the effect of earlier premium increases.
Seven in 10 respondents, 70%, said their business insurance costs had increased over the previous 12 months, while 10% reported dramatic increases.
Around 40% said higher insurance premiums were the main reason they were borrowing more.
A further 24% said they had increased borrowing because of higher Employers’ National Insurance costs.
The findings show how multiple cost pressures can interact. Even when one expense begins to stabilise, businesses may still face pressure from wages, taxes, insurance and other operating costs at the same time.
Borrowing is creating financial strain
The study also points to signs that some businesses are struggling with the additional borrowing.
More than one in five SMEs, 21%, said their company had defaulted on interest or capital repayments connected with credit taken out to pay for insurance.
At the same time, some businesses are reducing the amount of protection they purchase.
Premium Credit found that 14% of SMEs have reduced their insurance cover during the past two years, while 38% have increased their excesses.
These decisions can reduce immediate costs, but they also leave businesses more exposed if they need to make a claim.
Underinsurance is already having consequences
The research found that 30% of SMEs had been unable to claim for damage during the past five years because they either lacked the necessary cover or their existing insurance was inadequate.
Among those businesses, 21% said the damage they could not claim for was worth £3,000 or more.
That highlights the potential trade-off businesses face when cutting insurance costs.
Reducing cover or increasing excesses may lower premiums in the short term, but it can create greater financial exposure when a loss occurs.
SMEs remain optimistic despite financing pressure
Despite rising borrowing and continuing cost pressure, the study found that most SMEs remain positive about their outlook.
Nearly four in five businesses, 79%, expect their revenue to grow over the next year.
Only 5% expect revenue to decline, while a further 12% expect revenue to remain unchanged.
That confidence suggests many businesses are using finance not simply as a survival tool but as part of broader cash-flow management while they continue to invest and grow.
Insurance joins the wider SME cash-flow challenge
The findings add to a broader picture of SMEs relying more heavily on external finance to manage everyday operating costs.
Insurance is essential for many companies, but annual premiums can place significant pressure on cash flow when paid as a lump sum.
Thomas said premium finance is increasingly being used to smooth those costs:
Rather than paying a large lump sum upfront and tying up working capital, businesses are choosing to spread the cost of their cover into manageable monthly payments, making it far easier to plan ahead and manage their cashflow.
For SMEs, the benefit is greater flexibility.
The risk is that higher dependence on credit can increase financing costs and create additional repayment pressure, particularly if revenues weaken unexpectedly.
The research was conducted independently by PureProfile among 1,000 SME owners and managers between 18 and 28 September 2026.
Premium Credit’s Insurance Index tracks how businesses purchase insurance and how that insurance is financed.
About Premium Credit
Premium Credit is a UK insurance premium finance provider.
Its services allow businesses and individuals to spread the cost of insurance premiums rather than paying the full amount upfront.
The company publishes the Insurance Index to monitor changes in insurance purchasing behaviour and the use of credit.
