Premium Financing: The Small Business Savior
by Sean Jagroop
There are more than 27.9 million small businesses in the United States, and each face a slew of financial responsibilities – anything from payroll and accounts receivable requirements to handling taxes. And stacked on top of these various financial responsibilities are the numerous insurance policies needed to keep a business’s property and people protected. On average, a small business needs seven different types of insurance including liability, property, and vehicle, to name just a few. With this many policies in the mix, coverage can quickly become too expensive for many small businesses to manage.
In 2016 alone, $244.9 billion was spent on commercial insurance premiums—and this number has only continued to increase. Owning a small business is no easy task, but there are ways to help ease the burden. Leveraging the expertise of a retail agent who works alongside a premium financing partner, small business owners can utilize more flexible budgeting options, especially when resources are limited. But before owners begin to explore the benefits of premium financing, they need to first understand the most common issues small businesses face.
The Daily Struggles of Owning a Small Business
While small businesses account for more than 99.7 percent of businesses in the U.S., only one-third survive more than 10 years. These closures not only affect the individual business, but the workforce as a whole. When the doors close, jobs are lost and the entire industry suffers. There are many different factors that contribute to small business failures, but disorganized financial planning, and lack of recruitment and retention are the key culprits. With 77 percent of small businesses relying on personal savings for their initial funds, owners can lose a lot more than just their storefront if their business fails.
The most important facet of small business financial planning is a laser focus on monthly budgeting. With 50 percent of small business revenue coming through the door within a one or two month period, net expenses can quickly add up and become unaffordable. In fact, 82 percent of small businesses fail when payments—including insurance—don’t align properly with their budget.
While failing to establish a solid financial foundation can have a huge impact on your monthly budget, it also has the power to affect those ever-important recruitment and retention efforts. The rising costs of benefits, expensive equipment needs, lack of training resources and, of course, general financial struggles are all contributors to the recruitment challenges of small businesses. Potential hires aren’t particularly attracted to a business that isn’t financially stable. They’re also not inclined to work for an organization who can’t afford proper insurance coverage. Employees seek out stability—and that includes expecting some form of protection from their business. Without proper coverage or a stable financial plan, small businesses will suffer from high turnover and an inability to replace these employees. While these issues seem grim, there is a solution owners can utilize to prevent their business from becoming another sinking ship.
Premium Financing Saves the Day
As mentioned, monthly budgeting is the most important aspect that small businesses need to consider when crafting a financial plan. Well, nothing makes budgeting easier than fewer payments. Leveraging the services of a retail agent who works with a premium financing partner presents the option of bundling multiple policies from different insurance providers into one monthly plan. With only one insurance payment to anticipate, owners can create a firm, stable financial foundation for their business.
In preparation for such a variety of risks, premium financing can serve as a small business savior helping owners avoid financial issues due to poor budgeting down the road. Single payment, bundled coverage can provide small businesses with any amount of protection they may need at a much more affordable monthly rate—helping create a healthy bottom line, and most importantly, providing some much needed peace of mind while businesses are just getting on their feet.
Sean Jagroop is Director of Premium Financing at Fortegra where leads efforts to grow the company’s premium financing company, South Bay Acceptance Corp. A graduate of Baruch College with an MBA from Fordham’s Gabelli School of Business, Sean brings years of expertise to Fortegra having previously served in accounting, investment, and asset management roles for companies of distinction like Assurant and Prudential.
