Premium finance, described honestly.
Premium finance is one of three lines intended under Build Capital Credit. This page explains what the product is and how its collateral works, and it leaves open every question the firm has not answered.
What the product is
A commercial insurance policy is normally priced for a year and asked for in one payment. Premium finance is the loan that sits between those two facts: a lender pays the premium so the cover can be bound, and the insured repays the lender over the life of the policy instead of finding the whole amount at once.
It is an instalment loan with a single purpose. The money never reaches the borrower as cash; it goes to the party owed the premium, and what the borrower receives is the cover.
The loan exists so that a policy can be bound and paid for over its term. That single purpose is what separates it from general business lending, and it is also what gives it collateral.
The collateral mechanic
An insurance premium is earned by the insurer across the policy term rather than at the moment it is paid. The part not yet earned would be refunded if the policy were cancelled part way through, and that unearned portion is what the lender takes as collateral.
If the borrower stops paying, the lender's remedy is not to chase the borrower for the balance in the ordinary way. It is to cancel the policy and claim the unearned premium back from the insurer. The collateral therefore shrinks in step with the loan, and it sits with the insurer rather than with the borrower.
That structure is the argument for the product, and it is a part of the firm's internal research on this subject that the correction inside that same research explicitly leaves standing.
Frequently asked
Is premium finance a discount on the premium?
No. The premium itself is unchanged; what changes is when it is paid. A commercial policy is typically priced for a full year and asked for up front, while most businesses budget and generate cash monthly. Premium finance exists to close that timing gap, not to lower the underlying cost of cover.
Does financing the premium change the coverage?
No. The insurance policy is the same policy whether the premium is paid in one instalment or several. What is financed is the payment of the premium, not the terms of the cover it buys.
Who is the borrower's relationship with — the insurer or the lender?
Both, but for different things. The insurer owes the cover described in the policy. The premium finance lender owes nothing to the insured except the payment of the premium on their behalf, and is owed the instalments in return.
What happens to the loan if the policy is cancelled?
Cancellation is exactly the event the collateral mechanic described above is built around: the lender's remedy runs to the unearned premium held by the insurer, not to a general claim against the borrower's other assets.
What is not settled, and why nothing stands in its place
What it would take for Build Capital Credit to write this business is an open question. It is a question for counsel, it has not been put to counsel, and this page does not answer it in either direction. The firm's earlier work on it was built on a premise the firm has since disproven, and the file carrying that work now says so at the top of its own first page.
The market figures a page like this would normally reach for are contested inside the firm's own research. Where two sources on the tree disagree by an order of magnitude, publishing either one would be an invention with a citation attached to it. So the slots below are empty on purpose, and each says what it is waiting on.
Programme terms
No terms exist. There is no rate, no fee, no term, no minimum, no maximum and no eligibility rule, because none has been set and there is nothing to describe.
Market data
The firm holds internal research on this market. It is under review, it is not human-verified, and its authors have flagged the figures inside it as contested against other sources on the same tree. It is therefore not presented here as a view Build Capital holds.
Elsewhere in this section
The other two intended lines are Business Finance and Surety Finance, which applies the same mechanic to a bond premium where the bond form allows it. Build Capital Credit is the parent page for all three.