Most brokers are leaving money on the table
If you are offering premium financing to your clients purely as a convenience, you are using it wrong.
The brokers growing their agencies fastest have figured out something the rest of the market has not fully caught on to yet: premium financing is not just a service for clients who cannot pay upfront. It is a revenue line. A retention tool. And in the right states, one of the highest-margin products an independent agency can offer.
This guide breaks down exactly how it works and what the numbers look like for a real agency book.
How arranger fees work
In states that permit it, brokers can charge an arranger fee on premium finance agreements. This is a percentage of the financed premium that is paid directly to your agency for arranging the financing on your client's behalf.
The fee is separate from the carrier commission you already earn. It is disclosed to the insured in writing before the agreement is signed. And it is paid to your agency by the premium finance company after the loan funds.
The math is simple: if the financed premium is $60,000 and you charge a 3% arranger fee, your agency earns $1,800 on that one account — in addition to whatever commission the carrier pays you.
Here is what that looks like at scale.
The revenue math at different book sizes
Assume an average financed premium of $50,000 per account and a 3% arranger fee in a state that permits it.
Small book — 20 financed accounts per year:
- Total financed premium: $1,000,000
- Arranger fee income (3%): $30,000
Mid-size book — 50 financed accounts per year:
- Total financed premium: $2,500,000
- Arranger fee income (3%): $75,000
Active book — 100 financed accounts per year:
- Total financed premium: $5,000,000
- Arranger fee income (3%): $150,000
That is $150,000 in additional annual agency revenue — from accounts you are already servicing, without writing a single new policy.
And that number compounds. Every renewal cycle, every client you retain who keeps financing, the fee resets.
Premium financing also grows your commission income
Arranger fees are only part of the story. Premium financing changes how clients buy insurance, and that change benefits your commission income too.
When a client pays an annual premium upfront in one lump sum, they are acutely aware of the cost. That awareness often pushes them toward narrower coverage, higher deductibles, and fewer endorsements. Every dollar of premium feels like a dollar out of their pocket right now.
When the same client finances the premium into monthly payments, the psychology shifts. A $90,000 package becomes roughly $7,500 per month. Suddenly, the incremental cost of adding a $10,000 umbrella policy is a rounding error on their monthly payment, not a $10,000 line item on an invoice.
Brokers consistently report that financed clients buy broader coverage. That means higher premiums, which means higher commissions — on top of the arranger fee.
Financing improves client retention
This one surprises brokers who have not thought about it carefully.
A client who paid their annual premium upfront in January has sunk that cost. By July, they may be frustrated with their carrier, unhappy with their service experience, or being courted by a competitor — but switching mid-term is complicated. They are not going anywhere until renewal.
A financed client has an active monthly payment relationship. That relationship creates touchpoints. It keeps your agency name in front of them every 30 days. And practically speaking, cancelling a financed policy mid-term means disrupting a payment structure they set up and are accustomed to. The friction of switching is higher.
The data backs this up: financed accounts have higher retention rates than accounts paid in full, all else being equal. For an agency where the lifetime value of a commercial client is $5,000 to $15,000 in cumulative commissions, improving retention by even a few percentage points has a significant compounding effect.
How to track premium finance revenue as an agency KPI
If you are not currently measuring premium finance income separately from carrier commissions, start now. Here is a simple framework:
- Financed premium volume: Total dollar value of premiums financed through your agency in a given period. This is your top-line metric.
- Arranger fee income: Total arranger fees earned. Divide by financed premium volume to confirm you are capturing your full available fee percentage.
- Finance attachment rate: What percentage of eligible accounts (commercial lines over your minimum threshold, typically $10,000 in annual premium) are being offered financing? If this number is below 50%, you have untapped revenue sitting in your existing book.
- Financed account retention rate: Track whether financed clients renew at a higher rate than non-financed clients. Most agencies that measure this find a meaningful difference within 12 to 18 months.
These four numbers, tracked quarterly, will tell you more about your agency's revenue health than most standard agency management reports.
How premium finance compares to other ancillary revenue streams
Independent agencies have several options for generating revenue beyond carrier commissions. Here is how premium financing stacks up against the most common alternatives:
Policy fees: Flat per-policy fees, typically $25 to $75. Simple to charge but limited upside on large commercial accounts. On a $90,000 premium, a $50 policy fee is 0.06% of premium. A 3% arranger fee is $2,700.
Consulting or risk management fees: High-margin but require significant time investment and typically only apply to large accounts with complex risk profiles.
Referral fees (life, benefits, surplus lines): Meaningful when the referral converts, but dependent on client need and outside relationships.
Premium finance arranger fees: Percentage-based, scales with premium size, requires minimal additional time per transaction once your PFC workflow is set up, and applies to a large share of your existing commercial book. For most independent commercial lines agencies, this is the highest-leverage ancillary revenue opportunity available today.
What to do if your state does not allow arranger fees
Not every state permits arranger fees on premium finance agreements. If you are in a state where they are not available, premium financing still delivers value to your agency through the retention and coverage-broadening effects described above — you just will not earn the direct fee income.
That said, if you write business in multiple states and some of them permit arranger fees, structure your workflows so you are capturing the fee on every eligible account in those states. Leaving arranger fees uncollected in fee-permitted states is the most common premium finance revenue mistake brokers make.
Patch is licensed in Texas, Florida, Illinois, California, North Carolina, and South Carolina, and supports arranger fees in states where they are permitted. When you submit your agency profile, we will walk you through the fee structure for your specific states.
Getting started: what it takes to offer premium financing
The barrier to offering premium financing is lower than most brokers expect. You do not need a new license. You do not need new software beyond your PFC's quoting portal. You do not need to hire anyone.
What you do need:
- A licensed PFC partner in your state — like Patch
- A basic workflow for identifying eligible accounts and presenting the option at the point of sale or renewal
- A disclosure template for arranger fees if your state requires written disclosure (most do)
- A conversation — most clients who have never been offered premium financing simply did not know it was an option
The brokers who generate the most premium finance revenue are not the ones with the largest books. They are the ones who offer it consistently on every eligible account, every time.
Ready to add premium financing to your revenue mix?
Submit your agency profile and we will show you the arranger fee structure for your states, walk you through our quoting platform, and help you identify the accounts in your current book that are the best candidates for financing.
Frequently asked questions
How much can a broker realistically earn from arranger fees in a year?
It depends on your book size and the states where you operate. A broker with 50 financed commercial accounts averaging $50,000 in annual premium, charging a 3% arranger fee in a state that permits it, would earn $75,000 in arranger fee income annually. That number scales linearly with financed premium volume.
Do I have to disclose the arranger fee to my client?
Yes, in virtually every state that permits arranger fees. The fee must be disclosed to the insured in writing before the premium finance agreement is executed. Your PFC should provide disclosure templates as part of their standard onboarding. Do not skip the disclosure — it protects you legally and, when handled professionally, actually builds client trust.
Can I charge an arranger fee on top of my carrier commission?
In states that allow it, yes. The arranger fee and the carrier commission are separate forms of compensation, and both are permitted as long as both are disclosed to the insured. Texas is an example of a state where dual compensation — commission plus arranger fee — is explicitly allowed with proper disclosure.
Does offering premium financing require extra work for my staff?
Minimal, once your workflow is set up. Generating a premium finance quote typically takes a few minutes in your PFC's portal. The agreement is generated digitally and signed electronically by your client. After that, the PFC manages the payment collection and account servicing. Most agencies report that the incremental time per financed account is under 15 minutes.
What size accounts are the best candidates for premium financing?
Commercial accounts with annual premiums of $10,000 or more are typically the sweet spot. Below that threshold, the monthly payment savings may not be compelling enough to motivate the client to go through the process. Above $25,000 in annual premium, the case for financing becomes very strong — the cash flow benefit is meaningful and the arranger fee income is significant.
