One of our branches is in a very small town. Customer with property in SFHA goes to get flood insurance but doesn't have the funds to pay the premium until after our loan closes (HELOC).

Insurance agency (knowing the borrower) pays the premium to get the policy in place and borrower will reimburse insurance agency once HELOC funds are available. Is this acceptable?

I'm not aware of any restrictions regarding who pays the premium, just so long as the insurance coverage is adequate and in place. Is that correct?

Yes