Bad accounting practices can get you in trouble with tax authorities here. Many insureds need help financing their purchase of insurance. One of my friends, for example, can afford to buy a new car, but is daunted by the extra amounts needed for taxes, licenses, insurance, maintenance, and gas. However, they are not the only source, since banks, consumer loan companies, and others may be permitted by state law to make such loans. In addition, insurance companies may circumvent the need for financing in some cases by allowing installment payments or short-term policies.
Some agents start their own premium finance companies.
The amount of assets needed can be far less than that required to start a bank. However, there are a number of large, active finance companies happy to handle the financing, and to take the risk off the agent's back. Insurance being a highly regulated business, the amount of permissible loan charges may be set by statute, and loan agreement forms may have to be filed with insurance authorities. A typical financing agreement may have to be prepared according to precise statutory guidelines, with relatively little leeway. The premium check is usually made out to the insurer, unless the agent has authority to receive the money in the agent's name.