PGI Knowledge Centre

125% year on year increase in loans secured with personal guarantee attached

July 2022: Purbeck Personal Guarantee Insurance, the U.K.’s first and only provider of personal guarantee insurance has published its Q2 2022 figures on the take up of Personal Guarantee backed loans by small business owners, based on the volume of personal guarantee insurance (PGI) policies sold.  The volume of finance deals has jumped 125% year on year and small firms are ploughing more cash into acquisitions and growth.

The data is the only reliable source of information on the finance being secured by UK SMEs which have personal guarantees attached where the risk to the business owners/directors personal assets has been mitigated through insurance.

Insolvency – something that you probably don’t want to think about, especially if you’ve taken out a personal guarantee on a business that may be struggling, but it’s important that we do.

July 2022:  Our latest Freedom of Information request to the British Business Bank has uncovered the scale of debt and arrears associated with the Bounce Back Loan Scheme (BBLS). The findings have been revealed as the Financial Conduct Authorityⁱ  calls on lenders to treat SMEs fairly when recovering debts of up to £25,000 which fall under the consumer credit act.  The data revealed shows that BBLS loans in arrears as of end of June 2022, all exceed this amount, with the average loan £29,357.

Taking out a business loan is no simple matter. There’s a lot of money on the line, which is why it’s important that your assets are properly protected in the event that your business becomes insolvent.

When signing a personal guarantee in support of the business loan, you can choose to protect yourself by purchasing personal guarantee insurance.

As part of this process, you are well within your rights to make enquiries before you commit to a particular insurer’s policy, but how do you check whether an insurance company is safe and reliable?

Our specialists have put together a series of questions that you can ask your potential personal guarantee insurance provider to ensure that they are the safest and most reliable choice.

Following news that UK ministers are poised to launch a new £3bn recovery loan scheme that will require business owners to provide personal guarantees, Todd Davison, MD of Purbeck Personal Guarantee Insurance has cautiously welcomed the move but is urging the Government to ensure SMEs are under no illusions about the risks given the current challenges many businesses are facing.

While company status often offers protection to a business director, there are certain circumstances when directors may be held personally liable.

• • -> Personal Guarantee Backed Loan Applications by Small Builders/Contractors up 58%
  • -> Loans for ‘working capital’ up 78%
  • -> Average loan value falls by £23,000
    
    

• • Applications for Personal Guarantee Insurance to support business funding rose 50.5% Q1 2022 vs Q1 2021
    In March 2022, the number of applications doubled those received in March 2021. 
    • 35% of finance applications with a personal guarantee attached are for ‘Working Capital’
    • Applications for personal guarantee insurance to support funding for ‘Working Capital’ up 88% vs Q1 2021
    • The average loan rises 22%, from £142,718 in Q1 2021 to £174,104 Q1 2022
    • Finance applications for business development up 69%

We all know that in order to make money, you need to spend money, which is why many SME directors choose to take out loans to help their businesses grow, or when starting on a new venture.

April 2022: Following a report in the Financial Times this week suggesting that(i) a permanent replacement for the loan schemes offered to small and medium sized businesses during the pandemic is in the pipeline, we have welcomed the move but urge caution over personal guarantee requirements which could prove a barrier to take up.