Growing numbers of small businesses are having to rely on loans to pay for their insurance, according to specialist lender Premium Credit.
It said the proportion of small to medium-sized enterprises using debt to pay for all or part of their insurance cover has risen from 51 to 55 per cent over the past 12 months. Premium Credit said that although the average amount SMEs borrow has fallen from £1,130 to £1,080, around 15 per cent have borrowed more than £3,000. A year ago, the amount borrowing £3,000 or more was 13 per cent.
Half of those surveyed said the cost of their business insurance had gone up. To cope, 27 per cent have cut back on their level of cover, while 32 per cent cancelled at least one policy.
As a result, 18 per cent of SMEs say their level of underinsurance has increased, leaving them at risk of being without adequate cover when they need it.
Premium Credit director Adam Morghem said: “Underinsurance is a growing issue for SMEs, with firms increasingly cutting back on cover and in some cases cancelling policies entirely.
“The numbers of firms unable to claim for damage shows the risks involved in doing so.”
