Last week, I was talking to James, a general contractor who runs a mid-sized operation in El Paso. We were sitting in his jobsite trailer, surrounded by blueprints and coffee-stained papers. Business was good – maybe too good. He had three major projects running simultaneously, his crew was solid, and the work kept coming. But there was a problem he couldn't shake.

"I've got payroll hitting every Friday," James told me. "Material suppliers want payment on lumber deliveries up front. But my biggest client? They're cutting checks only at milestone completions – sometimes 60 days apart." He gestured at the stack of papers. "I'm stuck juggling weekly cash needs against payments that are anything but weekly."

Sound familiar? If you're in the contracting business, you know this dance by heart. Your expenses are constant and immediate, but your revenue comes in waves.

Then came the challenge: "And now my insurance is coming up for renewal. Fifty thousand dollars. Due in full."

That’s when I brought up a tool a lot of contractors don’t even know they have: premium financing.

What is Premium Financing?

Premium financing is basically a payment plan for your insurance. Instead of writing a massive check upfront, you spread your premium across monthly installments.

Think of it this way: you wouldn’t prepay Netflix for the next five years, right? So why would you hand over $50,000 in cash all at once for insurance coverage that lasts 12 months? Premium financing lets you keep your money working for your business—paying workers, covering materials, or simply smoothing out those unpredictable cash crunches.

Here’s how it looks in practice: for James's $50,000 premium, instead of writing one crushing check, he could put down $11,000 and then pay roughly $3,900 per month for 11 months. Suddenly, that lump sum becomes a manageable monthly expense that lines up with his regular cash flow.

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Does It Cost More?

Yes, technically. If you add up all the installments and compare them to a lump-sum payment, you'll pay more over time. James's $50,000 premium might cost him around $53,900 when financed.

But here’s the real question: What’s that cash worth to you today?

Paying upfront feels like saving money, but if it leaves you short when you need to pay workers or buy materials, it’s not a win. If you can use that $40,000 to earn a new contract, pay for materials upfront at a discount, or simply avoid dipping into a line of credit with an even higher rate, the financing can easily pay for itself.

Who’s Making Money Here?

The premium financing company is fronting the money, and they earn an interest rate for doing so. They also face risk that you might default, so they’re compensated for that risk. Your broker often shares in that spread. Some brokers even tack on an extra fee just because they can.

At Dragonfly, we don’t believe in nickel-and-diming. We charge part of the interest rate for arranging the financing, but we don’t layer on extra fees. And here’s a tip: always ask about fees. You’d be surprised what’s negotiable.

What About Cancelling My Policy?

This one surprises people. Yes—you can still cancel your policy even if you financed it. However, there’s usually a minimum earned premium that you’ll have to pay regardless of when you cancel. This means the insurance company keeps a certain percentage of your annual premium even if you cancel early—typically 10% to 25% of the total premium, sometimes more. The financing company collects what’s owed based on that minimum or however long the policy was active—whichever is greater.

What’s a Typical Interest Rate?

Around 12–15% is pretty common. At first glance, that might sound high. But compare it to the cost of not having the cash when you need it.

And keep in mind: the financing company is taking on risk here. They don’t have collateral beyond your insurance policy. For that reason, rates are higher than, say, a mortgage. But in many cases, they’re still lower than emergency credit cards or other short-term borrowing.

Is It Right for You?

Here’s the honest answer: it depends on your cash situation.

If you’re flush with cash and don’t mind parking a chunk of it in an insurance policy, paying upfront will save you some interest.
But if your business lives and dies by weekly cash flow—as many contractors do—premium financing can be a lifesaver. It turns one painful lump sum into a manageable monthly expense.

Most people think paying upfront saves money, but here’s why that’s not always true. The “savings” only matter if you actually have excess cash sitting around earning nothing. But if that money could prevent you from missing opportunities or going into expensive emergency debt, then financing makes perfect sense.

A Few Things to Remember

You wouldn’t prepay for years of streaming, so why hand over thousands at once for coverage that lasts only 12 months?
Keeping your cash working for you is often smarter than locking it away. Protecting your business shouldn’t mean emptying your account.
The choice isn’t about what’s “cheaper” on paper. It’s about what keeps your business running smoothly.

The Bottom Line

James decided to finance his premium. Three months later, he called to thank me. Not because financing magically solved his cash problems, but because when a supplier offered him a 15% discount for paying cash on a $50,000 lumber order, he had the money available to take the deal. That single move more than covered his financing costs for the entire year.

Cash flow is a risk just like accidents or liability claims—and premium financing is a tool to manage it. The key is knowing whether it makes sense for your situation. That’s where your broker comes in. A good broker should walk you through the options, help you compare costs, and set up financing if it’s right for you. If your broker doesn’t bring up premium financing, ask them why. And if they don’t offer it, find one who does.”

At Dragonfly, we tell our clients the same thing we told James: don’t let your insurance premium drain the lifeblood of your business. Keep your money flowing where it matters most—on payroll, supplies, and growth. Insurance is there to protect you, not bankrupt you.

So the next time that renewal bill lands on your desk, ask yourself: Is my cash better sitting in an insurance company’s account, or fueling my business? If the answer is the latter, premium financing might be the smartest move you make all year.

And remember: insurance should protect you—not feel like you just prepaid for five years of Netflix.

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