This may seem like an overwhelming task, but, largely, boils down to trying to maximize reward while minimizing risk.
» How do I minimize risk?
	The keys to minimizing risk involves identifying insureds that will be less likely to default and ensuring that a balanced, diversified portfolio is developed between the type of insured, industry class, premium size, etc.
» How do I maximize reward?
	The keys to maximizing reward are finding the type of loan which is most profitable. Profitable in terms of being able to generate a reasonable finance charge coupled with requiring minimal administrative burden to manage.
	Considering the following questions is a great starting point to both minimizing risk and maximizing reward. For further guidance and ideas, please contact your Broker Builder representative.
	1. Do I want to finance commercial insureds only or include personal insureds as well? 2. What will be a minimum and maximum premium to finance? 3. Do I want my individual producers determining when to provide PF quotes, or does the brokerage want to direct this process? 4. Do I want to offer the in house PF program only to existing insureds with whom we have a track record of successful repayment or to any new insureds as well? 5. Are there only certain industries we want to offer this program to? 6. Do we have a new business target for the in house PF program?

Once the business volume or amount financed has been forecasted, the amount of capital required to manage the premium finance service can be determined by multiplying the forecasted number by 1/3. For example, if $1,000,000 is anticipated as an amount to be financed over a year, then 1/3 of this amount or $333,333.33 would be a good estimate of capital required.

This rule of thumb is based on two main assumptions: the loan structure offered is 20% down payment and 9 instalments, and the business will be brought on in fairly equal monthly amounts.

Using the above rule of thumb to determine capital required to run desired premium finance program, the question becomes when is the capital required. The amount required is gradually required as the portfolio develops. This takes 6 – 9 months and would be needed in equal increments over this period. The full capital required is NOT needed at the outset. Operations can be commenced in advance of having full capital available in order to achieve profits sooner.

These include brokerage cash, shareholder loans, or equity infusion from owners. Returns expected by using these funds are in the neighborhood of 16% annually and can be compared to what would be achieved with GICs or bank interest provided.

Utilizing a credit facility issued by a financial institution is the more common approach to capitalizing an internal premium finance program. Many national banks are very open to supporting this type of facility as they see it as low risk and understandable. Limited brokerage capital would be required and the interest rate charged on the line is typically competitive. The brokerage generates profits from the spread between what is charged and what expense is incurred on the credit facility. These net profits will typically equate to $35,000 per $1,000,000 financed. Contact Broker Builder directly for assistance in seeking a credit facility.