Financing Your Insurance Premiums
Can Help Your Bottom Line
click here for a downloadable version
Financing your premium enables you to more efficiently manage your capital and use it where it is greatly
needed - building your business. Premium finance companies offer many options for financing. A
conservative 20% up front down payment with nine or ten installments is one of the most common options.
A frequent concern regarding premium financing is that the finance charges will increase the overall
expense of your insurance. There are many benefits of premium financing that could eliminate any
concerns.
What are the benefits of financing your premium?
- Availability of Credit. Premium financing keeps your credit lines open for other purposes,
such as operating expenses and additional operational needs.
- Fixed Interest Rate. A fixed interest rate assures you that your rate will not increase
over the term of the loan.
- Preservation of Capital. By amortizing your payments over the twelve month policy period,
you can free up capital for investment in other opportunities.
- Higher Returns on Retained Capital. Your retained capital will increase and be more useful
by not prepaying your premiums.
Premium finance companies, Imperial A.I. Credit, Premium Assignment Corp., First Insurance Funding,
Cananwill and many others, will provide cash flow analcash flow analysis sample:
|
Annual Premium
|
$50,000.00
|
APR
|
5.50%
|
|
Down Payment
|
$10,000.00
|
Finance Charge
|
$922.28
|
|
Amount Financed
|
$40,000.00
|
Payment Amount
|
$4,546.92
|
|
Number of Payments
|
9
|
|
|
|
Payment #
|
Due Date
|
Principal
|
Principal Remaining
|
Interest
|
Cumulative Interest
|
Retained Capital
|
After Tax Return on Retained Capital
|
|
0
|
Down Payment
|
$0.00
|
$40,000.00
|
$0.00
|
$0.00
|
$40,000.00
|
$500.00
|
|
1
|
6/1/2009
|
$4,363.59
|
$35,636.41
|
$183.33
|
$183.33
|
$35,453.08
|
$443.16
|
|
2
|
7/1/2009
|
$4,383.59
|
$31,252.82
|
$163.33
|
$346.66
|
$30,906.16
|
$386.33
|
|
3
|
8/1/2009
|
$4,403.68
|
$26,849.14
|
$143.24
|
$489.90
|
$26,359.24
|
$329.49
|
|
4
|
9/1/2009
|
$4,423.86
|
$22,425.28
|
$123.06
|
$612.96
|
$21,812.32
|
$272.65
|
|
5
|
10/1/2009
|
$4,444.14
|
$17,981.14
|
$102.78
|
$715.74
|
$17,265.40
|
$215.82
|
|
6
|
11/1/2009
|
$4,464.51
|
$13,516.63
|
$82.41
|
$798.15
|
$12,718.48
|
$158.98
|
|
7
|
12/1/2009
|
$4,484.97
|
$9,031.66
|
$61.95
|
$860.10
|
$8,171.56
|
$102.14
|
|
8
|
1/1/2010
|
$4,505.52
|
$4,526.14
|
$41.40
|
$901.50
|
$3,624.64
|
$45.31
|
|
9
|
2/1/2010
|
$4,526.18
|
$0.00
|
$20.74
|
$922.28
|
($922.28)
|
($11.53)
|
|
Summary:
|
Total After Tax Return on Retained Capital
|
$2,442.36
|
|
|
Total Cumulative Interest Paid
|
$922.28
|
|
|
Income Tax Savings
|
$322.80
|
|
|
Total After Tax Financing Benefit/Cost
|
$1,842.88
|
If you are interested in pursuing this useful option, please ask your Account Executive.
|
home