Purbeck Personal Guarantee Insurance Monitor Q1 2025       

Purbeck Personal Guarantee Insurance Monitor Q1 2025

As a director of a growing company, you’re constantly looking for opportunities to maintain your upward momentum. So when a lucrative new project is within reach, you need to act fast to secure it. But what if you need a quick injection of capital to purchase materials or cover labour costs before the contracts are finalised?

16th April 2025: Purbeck Insurance Services, the UK’s only provider of personal guarantee insurance to business owners is warning SMEs to be prepared to sign a personal guarantee for a major part of the loan secured through the Growth Guarantee Scheme. This follows feedback from customers who expected their personal liability to extend to just 30% of the loan.  

• 33% of UK SMEs are making a good profit and 55% have plans to expand
• The most profitable location to run a small business is in the West Midlands where 52% of firms are making a good profit
• Younger business owners are more profitable and more hungry to expand
• 84% of larger SMEs plan to adopt new technology, like AI in the new tax year

April 2025: As SMEs across the UK navigate the end of the tax year and  brace for an ‘awful April’ of rising bills, driven by fiscal changes such as minimum wage increases and national insurance contributions, a recent survey by Purbeck Insurance Services offers a more optimistic outlook.  The survey of small business decision makers from across the UK found that a third of SMEs are already making a good profit and more than half (55%) have plans to expand their business this year. Age and postcode matter, however, and younger business owners in the West Midlands are currently painting the brightest picture of business success.

We're now at that time of year when the weather is getting brighter and new growth is starting to appear. It’s a time for renewal, and for businesses the end of the financial year is much the same. It’s a time to reflect, review your financial obligations, and assess potential risks.

March 2025: As the Chancellor prepares her Spring Statement amid ongoing concerns over the rate of inflation, a new surveyⁱ⁾ of SME decision makers suggests a third of businesses (35%) are planning to  implement price increases to help mitigate the uplift in NIC from April 2025. Furthermore, 39% of firms are planning to introduce staff benefits to avoid higher wage bills.

Picture this:

Purbeck Insurance Services urges SMEs to prepare for NIC Increase

Whether you’re expanding your team, relocating to new offices, or investing in new equipment, taking the next step forward in business often requires significant funding.

Purbeck Personal Guarantee Insurance Monitor Q4 2024

Purbeck Personal Guarantee Insurance Monitor Q4 2024

As the year draws to a close, business owners across the UK find themselves navigating one of the most hectic periods on the calendar. From financial reporting and tax preparation to operational reviews and planning for the new year, end-of-year demands can feel overwhelming.

Purbeck Insurance Services Hits Key Milestones

What can you do when even strong sales fail to meet payroll and supplier expenses on time?

Key Findings:

Securing your company's future requires bold moves - from expanding your operations to investing in state-of-the-art equipment. However, you often need significant funding to put these strategies in motion.

• 80% have worked in their own time
• 68% have looked at work emails outside business hours
• 50% have changed or cancelled a day off due to work

YouGov survey for Purbeck Insurance Services

YouGov survey for Purbeck Insurance Services

So you're ready to expand your business.

As a business owner, you know that growth often requires bold steps, especially if you're launching a new venture.

Discover the importance of financial well-being for maintaining a thriving business, and how personal guarantee insurance can mitigate bankruptcy risks.

As we approach the general election on July 4th, businesses, especially SMEs, need to prepare for potential economic instability caused by wavering confidence in the business landscape.

In today's rapidly changing economic environment, protecting your assets has become more than just a preventative measure; it's now a necessity.

The start of a new fiscal year presents the perfect opportunity to reassess your business’s financial position and plan ahead to ensure future success.

April 2024: As the Federation of Small Businesses (FSB) calls for a more comprehensive investigation into the use of personal guarantees for small business loans, the number of small business owners becoming personal guarantors continues to rise.  According to new analysis of applications for personal guarantee insurance in Q1 2024, by Purbeck Personal Guarantee Insurance, the UK’s sole provider of insurance protection for personal guarantees, there has been a 49% rise in business owners seeking Personal Guarantee Insurance (PGI) for a small business loan. And most of these were for loans to simply keep their business running.

• Companies founded solely by women garnered just 1.8% of the total capital invested in venture-backed startups in Europe.  
• The total value of loans supported by Personal Guarantee Insurance (PGI) was over £379m in 2023, but just 5% of that value was for female founders.
• 11% of people taking PGI for a business loan have been women, a small rise on 2022 which saw just 9% of policies taken by women for personal guarantee backed loans.
• The total value of loans supported by PGI amounted to over £379m in 2023, but just 5% of that value was for female founders, equating to £20m.

Imagine you’re launching your business – a passion project that’s been brewing in your mind for years. You have the idea, the plan, and the drive to make it happen, but when it comes to securing the financing needed to turn your vision into reality, you hit a brick wall.

March 2024: As the FCA outlines its plan to address the Federation of Small Business’ super-complaint regarding the use of personal guarantees on small business loans, Todd Davison, MD of Purbeck Personal Guarantee Insurance says: 

FCA response to FSB super-complaint is imminent 

• 76% of small businesses in profit
• 32% of those seeking new finance need it to support cashflow
• Personal guarantee insurance can provide peace of mind for small business owners

When it comes to navigating the market and understanding complex insurance options, clients sometimes need a little helping hand to find the right solution that will meet their needs.

Headline Figures from The Purbeck Personal Guarantee Insurance Monitor for Q4 2023:

2024 is predicted to be a challenging year for the housing market, with forecasts indicating significant increases in mortgage rates. This potential surge is the effect of The Bank of England’s decision to hike interest rates, sparking an increase in housing costs that has sent a ripple through the mortgage landscape.

January 2024: As buy-to-let mortgage rates fall, bringing some relief to buy-to-let landlords, those shopping for a new mortgage deal are being warned by Purbeck Personal Guarantee Insurance, to prepare for a personal guarantee demand.

January 2024: In a new survey of small businesses by Purbeck Personal Guarantee Insurance to gauge the financial and emotional resilience of owner/managers, 1 in 4 respondents (24%) said their mental health had been directly affected by the stress of managing the finances of their business in the past year. While 1 in 4 is far from positive, this is a significant improvement from 49% in the same survey last year and underlines the tenacity and resilience of small business owners, as they continue to face challenging economic headwinds.

January 2024: Following the FSB’s Super-Complaint to the FCA over SME lending practices, including the use of personal guarantees on small business loans, new data from Purbeck Personal Guarantee Insurance has revealed that 7% of the low-value, personal guarantee-backed loans it has protected have been for under £10,000, while 16% have been for under £19,999.  

The prospect of business insolvency is a daunting reality that most business owners and directors shy away from. However, preparing for the potential of financial turbulence and understanding the available routes is crucial.

November 2023: In a new survey of 1000 consumers underlining the impact of the cost of living crisis on shopping habits, 51% confessed they have haggled for an essential product or service this year. The survey by Purbeck Personal Guarantee Insurance, the small business champion, suggests the U.K.’s small businesses need to be on guard as 21% in the survey think it's fine to haggle when buying from an independent retailer or small business owner and a third are planning to haggle to save costs this Christmas. 

December 2023: Responding to FSB’s Super-Complaint to the FCA over SME lending practices Todd Davison, MD of Purbeck Personal Guarantee Insurance says:

November 2023: The difficulty small business owners are experiencing accessing funding without having to sign a personal guarantee has become clear. October 2023 saw the largest number of small business owners ever recorded, taking insurance to mitigate the risk of signing a personal guarantee as a condition of a business loan according to Purbeck Personal Guarantee Insurance.

November 2023: As property rental prices reach record levels according to the latest ONS  data, Purbeck Personal Guarantee Insurance is urging the Chancellor of the Exchequer, The Rt Hon Jeremy Hunt MP to reinstate the ability of landlords to set the full amount of mortgage interest against rental income, before tax is calculated.  Currently, all of the rental income made from a property is taxed. Landlords can claim back mortgage interest costs but only up to the basic income tax rate of 20 per cent.  The restriction of buy-to-let mortgage tax relief, also known as Section 24 can be avoided if a buy to let mortgage is taken in a limited company structure but this type of mortgage can be more expensive and often requires the landlord to sign a personal guarantee.

November 2023: Responding to the oral evidence provided to the Treasury Committee’s Inquiry into SME finance, Todd Davison, MD of Purbeck Personal Guarantee Insurance says:

While a personal guarantee can be the golden ticket in helping you secure crucial funding for business ventures or expansion, it can present an enormous risk to your assets.

November 2023: As the number of buy to let mortgages taken in a limited company structure rises, and property values fall, Purbeck Personal Guarantee Insurance, has launched the first personal guarantee insurance protection for Professional Landlords.

In a development that has sent ripples through the financial industry, the Bank of England recently implemented a freeze on interest rates, marking the first time in two years that the rates have remained unchanged. This measured approach comes as the Bank of England continues to stabilise the economy.

Headline Figures:

October 2023: As Buy to Let mortgage rates start to fall and the number of landlords securing limited company buy to let mortgages rise, Purbeck Personal Guarantee Insurance is warning Professional Landlords to keep their eyes wide open over the risks of personal guarantees as a condition of the mortgage. Purbeck’s analysis shows the average Limited Company Buy to Let Mortgage was £948k in 2022.  So far in 2023, the average Buy to Let Mortgage has shrunk to £895k based on Purbeck’s data.

2023 has been a tough year for UK businesses, particularly SMEs, who have had to navigate treacherous economic waters. 

Business buy-to-let mortgages provide an excellent opportunity for businesses to invest in commercial property, whether to be let to a third party or to be used as premises to trade from.

Investing in your business through a buy-to-let mortgage can offer substantial rewards, helping you to secure commercial property to expand your operations or gain profit through letting to a third party. However, it’s essential to be informed and prepared for the potential risks.

A personal guarantee is a pretty serious commitment, but it’s not one to shy away from.

For the last three years, UK businesses of all sizes and sectors have experienced significant financial challenges. 

Applications for Personal Guarantee Insurance Down 13%

• - 78% of small business are in profit despite late payment affecting 81%
• - Just 7% of small business owners have had to take a pay cut
• - Only 1% of small businesses are close to insolvency
• - Personal guarantee insurance can provide peace of mind for small business owners

With the UK’s turbulent economic climate, it’s no surprise that businesses, from SMEs to large corporations, are facing financial challenges.

• -    Failed acquisitions a leading reason for small businesses to go insolvent
• -    Overreliance on accountants to keep on top of the numbers
• -    Solid steps can be taken to avoid insolvency pitfalls
• -    Personal guarantees can provide peace of mind for small business owners

June 2023: Acquisitions that go wrong are a top cause of business insolvency, according to Purbeck Personal Guarantee Insurance, which has analysed claims from business directors for personal guarantee insurance, following insolvency.  Not being close to business financials due to an over-reliance on accountants, and bad debts or payment disputes, were also major reasons why business owner’s dreams ended in a nightmare.  There is good news, however, as there are solid steps that can be taken to avoid some of the most common reasons businesses fall into insolvency.

Todd Davison, our MD said:  “Business failures can often occur after a business acquisition.  When a business goes through a leveraged buyout, where the target company to be acquired is loaded with debt to buy out the former shareholders, then this has an adverse cash flow and margin impact to meet the repayment obligations. It means an immediate deterioration of the balance sheet position.  So the new owners have to grow the business or deliver substantial cost savings through the business quickly, to avoid failure.”

Firms window dressing their business to make it appear more secure than it actually is prior to acquisition can be common, according to Purbeck Personal Guarantee Insurance.  Robust due diligence processes including, arranging a financial audit, scrutinising the validity of future orders and analysing future staff and cost savings that can be made once acquisition has happened, can all help to sidestep insolvency.

Purbeck also advises keeping a close eye on the balance sheet. It found that often a director, who is incredibly skilled at providing a product or service, may rely on their accountant for day to day financial running of their business.  Unfortunately though, it is the business owner who ultimately shoulders responsibility for business cash flow, so directors should seek clear explanation from accountants to ensure they are always knowledgeable about their financial situation.

Bad debts or payment disputes were the third most common reason businesses fell into insolvency.  Businesses looking to protect themselves from bad debt will always research potential clients thoroughly before selling goods and services to them.  According to Purbeck, however, a common theme amongst directors claiming on their Personal Guarantee Insurance was an overconcentration on one or more customers who were late payers, which in due course, put a stranglehold on the creditor’s business.

Finally, when a business is doing well, it is tempting to raise finance to develop it further, but when growth slows, firms often find the finance cost becomes unaffordable.  Todd Davison concludes: “Instances like overtrading can be avoided by focussing on profitability, rather than revenue growth.  Equally, due diligence before an acquisition and trying not to put all your eggs in one customer’s basket can all help to make positive impacts on trading.  Ultimately, everyone wants small businesses to succeed, as a personal guarantee insurer, none more than us.  With personal guarantee insurance in place, however, the comfort of knowing that directors will not have to pay back business debt through their own finances, such as their home or personal savings can be hugely reassuring to small business owners.”

• -    49% of small business owners are personal guarantors for a business loan or plan to be by the end of the        year
• -    50% of small business owners have already or are planning to secure new finance in 2023
• -    42% of these people need the money to pay off outstanding debt
• -    Personal guarantees can work for small businesses if they mitigate the risk

June 2023: Underlining the high stakes involved in being a small business owner in 2023, a new survey has uncovered that over a third (34%) have put their home and life savings on the line for their business by signing a Personal Guarantee for a business loan. If their business fails, they risk losing everything.  Furthermore, 15% of those surveyed anticipate becoming a personal guarantor for a business loan within the year. The findings of the survey by Purbeck Personal Guarantee Insurance, demonstrates how difficult it has become for small business owners to access funding without taking the serious step of signing a personal guarantee.  

Worryingly, the survey also found that while half of small businesses plan to secure new finance this year, 53% of these small business owners are borrowing to ease cash flow and 42% need the money to pay off existing outstanding debt.

Raising finance in a struggling economy is not easy and while the survey found that 43% will seek finance from a traditional lender in the form of a business loan, 28% plan to use their credit cards and 28% plan to use overdrafts to help fund their business.  In addition, 1 in 5 (21%) will ask friends or family for cash.

Todd Davison, our MD said: ”In today’s turbulent economy, it will come as no surprise that small business owners are seeking additional finance but it has become increasingly difficult, since the Pandemic, for a small business to find funding without a personal guarantee requirement. It is vital that business owners fully understand the risks of signing a personal guarantee and importantly how to mitigate them.  This can range from sharing the risk to using personal guarantee insurance to help settle the debt, should the business fail.  So far in 2023, we have seen more SME owners apply for personal guarantee insurance^[ii] (PGI) to mitigate the risk of business failure, than at any time previously.”

After the 2008 financial crisis, the popularity of leverage buyouts experienced a decline, but the use of this dynamic acquisition strategy is on the rise once again. 

May 2023:  A Freedom of Information request to the British Business Bank by Purbeck Personal Guarantee Insurance, the U.K.’s only provider of personal guarantee insurance (PGI) to small business owners has revealed the current level of debt and arrears associated with the Bounce Back Loan Scheme (BBLS), The Coronavirus Business Interruption Loan Scheme (CBILS) and the Recovery Loan Scheme (RLS). Purbeck’s analysis shows that over 145,000 BBL loans worth £3.8bn are in default as businesses continue to battle economic headwinds.

The findings come as latest estimates show that of £47 billion paid out in Bounceback Loans, £17 billion is already expected to be lost, £4.9 billion of that - over 10% of the loans - to fraud. 

9% of Bounce Back Loans are currently in default, down fractionally from 12% in July 2022 with the average loan in default standing at £26,571. 

While there are fewer CBILS loans in default - under 2% - this is a small rise on July last year when 1% of loans were in default. The average amount owed is £175k, from £164k in July 2022.

The analysis has also uncovered that businesses are typically borrowing £210k under the Recovery Loan Scheme which is open for applications until June 2024, and the average personal guarantee commitment made by business owners to secure a loan under the Scheme is £472k.


Bounce Back Loans default statistics:

For a business owner or director, entering into a personal guarantee and placing your personal assets at significant risk can be a daunting prospect, which is why it’s crucial to be aware of some of the factors surrounding this form of legal agreement. 

At Purbeck, we understand that signing a personal guarantee is a huge commitment.

15^th March 2023: Small business champion, Todd Davison, our MD, responds to today’s Budget and the updated economic and fiscal forecasts for the next five years from the Office for Budget Responsibility (OBR). It was confirmed that inflation will halve by the end of the year and the UK will escape a ‘technical’ recession.

March 2023: Purbeck Personal Guarantee Insurance, the provider of personal guarantee insurance to the owners of SMEs has set out its wishlist for the Chancellor The Rt HON Jeremy Hunt MP, ahead of the Budget on 15^th March 2023.

The total value of loans supported by Personal Guarantee Insurance was over £300m in 2022, but just 4% of that value was for female founders

February 2023: Following news that a record number of new businesses were founded by women in 2022, new analysis of personal guarantee backed loans has uncovered a huge disparity in the level of financing women are securing compared to men. The analysis appears to support the findings of the Rose Review that female entrepreneurs are continuing to face challenges with access to funding.

Purbeck Personal Guarantee Insurance, the provider of personal guarantee insurance (PGI) has found that over the past 5 years, just 10% of people taking PGI for a business loan have been women.  Indeed in 2022, just 9% of policies were taken by women for personal guarantee backed loans. Furthermore, the total value of loans supported by Personal Guarantee Insurance amounted to over £300m in 2022, but just 4% of that value was for female founders, equating to £12m.

Todd Davison, our MD said: “The Rose Review has highlighted that funding remains the number one barrier facing female entrepreneurs. Women have been less willing than men to take on debt and less aware of different funding options, according to the review. We welcome the initiatives to boost access to and awareness of funding and clearly there is a role for Purbeck to play in making more female founders aware of personal guarantee insurance as an effective way to minimise the risks of personal guarantee backed loans.”

• -    The number of applications from small builders for personal guarantee insurance more than doubled in          2022, up 135% on 2021
• -    Average personal guarantee backed business loan rose to £174,101 in Q4 2022
• -    Local builders are securing finance just to keep business ticking over

February 2023: The number of local builders applying for personal guarantee insurance (PGI), to protect their personal assets should their business fail, hit a new high in 2022.

Purbeck Personal Guarantee Insurance, the U.K.’s first and only provider of personal guarantee insurance saw applications from local building firms up 135% in 2022 on 2021, as directors/owners took on new finance that put their personal assets at risk. Lenders will ask for a personal guarantee when there are not enough assets in the business to repay the loan if the business fails.

Underlining the increasing costs of running local building businesses, the average value of personal guarantee backed loans taken out by local builders rose to £174,101 in Q4 2022.  This is up from £156,900 in Q4 2021 – an increase of over £17,000.

The main reason for local building firms taking new finance in 2022 was for working capital, to assist with the day to day running costs of the business.

Todd Davison, MD of Purbeck Personal Guarantee Insurance said: “Our findings uncover the personal risks many small builders have accepted in the past year to secure finance to keep their businesses from insolvency.

“Many builders in need of new finance not only find that there’s a poor choice of loan products, but when they are able to find the right loan, they have to take on a big chunk of risk themselves as security for the lender. This means if the firm fails, the lender could use the builder’s personal estate such as their home and savings to settle the debt. A rapidly growing number are therefore taking steps to protect their personal assets should their business become insolvent.

“Small builders are feeling the impact of inflation and economic uncertainty on all sides and we know a growing number of construction companies are in ‘critical financial distress’. It therefore makes perfect sense that they are doing what they can to bring some certainty in very uncertain times. We would certainly urge any local builder that is considering new finance to fully investigate the pros and cons of signing a personal guarantee and consider insurance to mitigate the risk.  Unlike other forms of insurance, a PGI policy includes free mentoring and advice if a business gets into financial distress, to help prevent failure.”

The last three years have been a challenging time for both emerging and established businesses, from the COVID-19 pandemic to the cost of living crisis, and now the potential for inflation to continue into 2023. 

• -    Applications for personal guarantee insurance up 106% in Q4 2022 and 145% for 2022 on 2021
• -    Working capital top reason for new funding, applications up 144% in 2022 on 2021
• -    Huge 181% rise in applications for cover on loans £25-£50k year on year
•  

January 2023: Personal guarantee insurance (PGI), a product used by small business owners to protect against the risk of a personal guarantee being called in for a business loan, saw a steep rise in popularity in 2022 as the owners and directors of some of the U.K.’s smaller, limited businesses, took on new finance that put their personal assets at risk. Lenders will ask for a personal guarantee when there are not enough assets in the business to repay the loan if the business fails.

Purbeck Personal Guarantee Insurance saw applications for protection more than double, rising by 106% in Q4 2022 vs Q4 2021. Across the whole of 2022, applications for personal guarantee insurance rose 145% on 2021 underlining the personal risks many small business owners have accepted in the past year to keep their businesses from insolvency.

Personal guarantee insurance has proved to be particularly popular amongst the owners and directors of smaller manufacturing businesses where there has been a 285% increase in applications for PGI in Q4 2022, compared to the same period in 2021.

The biggest reason for personal guarantee backed finance is ‘working capital’ with 35% of insurance applications for this reason. Year on year, the volume of personal guarantee backed finance for working capital grew 144% on 2021. In addition, asset purchase, typically for new equipment or machinery doubled in volume year on year.

In Q4 2022, most loans being taken out were between £75k and £100k in value but looking at the whole of 2022, the biggest year on year increase has been for much smaller loans from £25k-£50k in value, which jumped by 181%.

Todd Davison, MD of Purbeck Personal Guarantee Insurance said: “We know small businesses are facing huge cost challenges as they try to recover from the pandemic and problems with access to the finance they need to continue operating.  Our latest PGI monitor shows that where loans are being made available, the owner is needing to take on a big chunk of risk themselves and a rapidly growing number are therefore taking steps to protect their personal assets should their business fail. We must not forget, business owners are not only facing increasing costs at work, they are keeping the wolf from the door at home too, it therefore makes perfect sense that they are doing what they can to bring some certainty in very uncertain times.”

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52% of small firms just ‘treading water’, rising to 72% in East Midlands

November 2022: New analysis of startup loans with personal guarantees attached has found that the average loan has fallen over 138% in the past year to £142,492, from £339,304 in 2021.  The analysis by Purbeck Personal Guarantee Insurance, the U.K.’s only provider of personal guarantee insurance (PGI) to small business owners, has also identified that the number of start-up loans has more than halved compared to 2019.

The findings follow the recent British Business Bank report showing external finance usage by small businesses has fallen overall across the UK, underlining the challenge startup founders now face in accessing finance for working capital and the increasing personal risks they are being asked to take due to a greater demand from lenders for personal guarantees. 

With the country facing the highest rise in inflation we’ve seen for 40 years, measures have been taken by the Monetary Policy Committee (MPC) to stabilise the UK economy. This comes in the form of repeatedly increasing interest rates. 

November 2022:

November 2022: A new survey by Purbeck Personal Guarantee Insurance of 1000 small business owners/managers across the UK suggests that many are unprepared for lenders’ increasing demands for security in return for business loans.

Prices rises, extension to business hours and energy savings top tactics to keep small firms afloat

• -     123% year on year increase in business loans secured with personal guarantee attached
•  
• -     Loans secured for growth at highest level since Q1 2021

October 2022: Purbeck Personal Guarantee Insurance, the U.K.’s first and only provider of personal guarantee insurance has published its Q3 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 123% year on year.  While working capital remains the prime reason for new funding with 28% of loans secured for this reason, Purbeck’s analysis shows that more small businesses are using finance to invest in growth opportunities compared to Q2 2022.  In fact, the number of loans being used to support growth opportunities has reached its highest level since Q1 2021.

Unsecured loans remain the prime funding route making up 37% of business loans in Quarter 3 2022, up from 28% recorded in Quarter 2 2022.

However, the average value of loans has fallen by around 10%, from £164,524 in Q3 2021 to £148,357 in Q3 2022. 

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.

Todd Davison, our MD said: “Despite concerns over access to finance for small businesses, our data shows that Q3 2022 has been another strong quarter in personal guarantee backed loans for small businesses. We have seen a steady increase in loans secured for investment in growth opportunities which is hugely positive given the immense cost challenges facing many small firms. With interest rates rising, the issue now is servicing these new loans as the cost of doing business continues to grow.”

“This really underlines the importance of personal guarantee insurance to protect the personal assets of business owners and directors who have put their savings, investments and even their home on the line as security should their business fail.  With insolvency rates exceeding pre-pandemic levels it is vital small business owners take every step they can to mitigate the risks that come with securing new funding.”

1 in 5 Personal Guarantee Insurance applications from start-ups Q2 2022

Personal guarantees are an effective way to secure a loan that is crucial to your business’ growth and success. However, there’s no denying the risk to your personal assets.

September 2022: Purbeck Personal Guarantee Insurance, the U.K.’s first and only provider of personal guarantee insurance to the owners and directors of small businesses, has welcomed the Energy Bill Relief Scheme announced today, to cap the amount small firms can be charged for their energy bills.

For many businesses, the recovery loan scheme provides a critical lifeline for financial recovery and growth, providing access to crucial funding required to navigate the economic challenges in the months following the pandemic. 

Purbeck’s top tips for surviving a recession

August 2022: Purbeck Personal Guarantee Insurance, the U.K.’s first and only provider of personal guarantee insurance is urging small businesses to think like mortgages switchers and consider a fixed rate loan now to support investment or to sustain a business, while rates remain low. Since March 2021, businesses have, in aggregate, repaid more finance from banks and capital markets than they have raised. Company insolvencies are also returning to pre-pandemic levels after the lows recorded in the pandemic.

Todd Davison, our MD said: “Bank risk-appetites are largely returning to what they were in 2019 but small businesses are paying back more than they are borrowing.  That makes sense if you are on a floating interest rate for a loan.  However, around 25% of small businesses made use of the Bounce Back Loan Scheme with a low fixed interest of 2.5%.  Given the Bank Rate is forecast to peak at 1.9% during 2023, any small business considering new funding needs to act fast to protect themselves from the impact of rate rises, just like many people switching to fixed rate mortgages."

“While reticence to take on more debt is understandable, many business owners wouldn’t think twice about a mortgage for a dream home. One of the major comfort factors with a business loan is that Personal Guarantee Insurance protection cuts the risk of losing everything should a business fail, making the decision to take on a loan far easier.”

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.

Does the cost of Personal Guarantee Insurance outweigh the risk?

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.

As a business owner, you’ve got to be comfortable with an element of risk. Not only are you risking your own money, but if you take out credit, you’re risking somebody else’s too.

Starting a business is one thing but keeping it going often needs extra cash and while there is a good choice of funding options to consider, as a start-up it is unlikely you will have security in the business to offer the lender. This means you may need to sign a personal guarantee.

March 2022: Ahead of the Chancellor’s Spring Statement on 23rd March 2022, we're urging Rishi Sunak to consider key measures to support small businesses following news that company insolvencies doubled in February^[i].
 

People with Personal Guarantee Insurance Double Year on Year

• Men are more likely than women to want to start their own business – 57% of male respondents compared to 43% of female
•  
• People in London and the South East are most likely to be budding entrepreneurs
•  
• Those between 25 and 34 are the keenest to become their own boss (66%), followed by those aged 18-24 (55%) but 41% of the over 55s surveyed also have ambitions to start their own enterprise

The latest data shows that three in four of all small and medium size businesses in the UK are carrying some form of corporate debt, with an average borrowing of £200,000.

February 2022: With just a couple of months to prepare for the April 2022 Solicitors’ Professional Indemnity Insurance (PII) renewal season, the Partners/Directors of Solicitors’ firms are being urged to plan for the likelihood that they will need to sign a Personal Guarantee as a condition of their run-off cover. This could put their homes and other personal assets on the line if the firm fails.

February 2022: Our new survey amongst^[i] the employees of SMEs has found that over a third of firms (34%) took no measures at all to deal with the pandemic over the past year.

12% of respondents said the business they worked for actually increased headcount during the past 12 months, compared to 14% that reduced staff numbers. Furthermore, 9% of respondents confirmed that within their business, workers’ hours had been increased in 2021 and 8% worked for a business that had found new investment in the past year.

While concerns are rising over the number of businesses now struggling to honour Government backed loans, the findings paint a more positive picture of how far the pandemic impacted the U.K.’s SME community, and how resilient many firms have been in the face of unprecedented operational challenges during the second year of the pandemic.

Todd Davison, our MD, said: “It is hugely encouraging to understand that over a third of SMEs were able ‘keep calm and carry on’ without recourse to Government support or taking their own measures to cut costs. While we seem to be reaching the other side of the pandemic, it will be the survival of the fittest in 2022 as businesses face increased running costs and the continuing challenges over late payment of invoices.  

“We would urge any business owner considering a loan as the new financial year approaches, to prepare for the likelihood that they will need to sign a personal guarantee, fully understand the risks and most importantly how to mitigate them. New funding should not mean unnecessary risk for business owners, particularly after such a tumultuous two years.”  

Insurers increasingly requiring Personal Guarantees for run off claims

February 2022: As the April 2022 renewal season for Solicitors’ Professional Indemnity Insurance fast approaches, insurance brokers will be under pressure to help the Partners/Directors of Solicitors’ firms cut the risk of personal guarantees now being demanded by some insurers as a condition of cover. We are urging brokers to include our Professional Risks Personal Guarantee Insurance (PGI) policy in their armoury as they face another challenging renewal period.

In recent years, there has been more scrutiny around the financial position of SME law firms with certain participating insurers requesting Personal Guarantees from the partners and leaders of small LLPs and incorporated businesses when offering Solicitors’ Professional Indemnity Insurance. This is to provide the insurer with means of recovery in respect of the run-off premium in the scenario where the solicitors firm fails, enters an insolvency procedure and the insurer is obligated to provide 6-year run-off cover.

Professional Risks Personal Guarantee Insurance (PGI) is an annual policy providing insurance cover for the Directors of solicitors firms that have provided Personal Guarantees to insurance companies in respect of Professional Indemnity Insurance (PII) run-off premiums. The run-off premium is typically 300% of the latest annual PII premium. The cover applies where the run-off premium cannot be met by available cash resources of the firm.

Todd Davison, our MD, said: “During the past year we have seen increasing interest from Solicitors firms for Personal Guarantee Insurance specifically for Professional Indemnity cover. Our Professional Risks PGI helps protect the personal assets of the Directors of Solicitors firms and offers brokers a powerful proposition with commission opportunities as they prepare for the April renewal season.”

January 2022: Recent studies that have found money can buy happiness[i] appear to have been substantiated in a new survey of the employees of the UK's small businesses[ii]. As work from home guidance is lifted, people earning over £40k might be lamenting the easing of restrictions. In the study, these higher income earners were most likely to enjoy working from home and reported lower physical and mental health concerns and worries than lower income workers.

67% feel mental well-being has been impacted by pandemic

Loan notes, promissory notes, bill of exchange; whatever you call them, they’re an integral part of modern business and financial management. 

In a sign of the increasing uptake of personal guarantee backed business loans amongst small business owners, and a corresponding need to mitigate the personal financial risks of these loans, we saw policy numbers increase year on year by 143% in October 2021, making it a record month!

The market sectors where business owners and directors have taken Personal Guarantee Insurance over the past month are predominantly construction, wholesale and professional services.

Keir Cox, our Operations Director, said: “Our data suggests businesses are keen to borrow as we get to the other side of the pandemic but may be facing a limited choice of options from lenders, outside of personal guarantee backed loans.  This is even with a strong trading position, as has been the case for the majority of applicants over the past month.

“The increasing demand for personal guarantees from lenders was an issue we foresaw as an outcome of the pandemic but while business owners may have little choice over signing a personal guarantee if they need access to cash, Personal Guarantee Insurance is giving them the confidence to take on a loan without significant risk to their personal assets.”

Start-ups warned to start on the right foot

For many people wanting to start (or grow) their own small business, a personal guarantee is the only way to successfully secure essential funding, but what is a personal guarantee, and is it a requirement to take our a loan for a new business?

Ahead of the October budget, we suggest 5 key measures to support the engine room of the economy

As a company director, you’re legally accountable for your company’s records, accounts and performance, even if you hire someone else to handle certain day-to-day responsibilities (such as an accountant). The information that you’re responsible for sending to Companies House are as follows:

September 2021: Following news of an 18 month high in registered company insolvencies[i], we are urging the owners of small and medium sized businesses to ensure their personal assets, such as their home, bank account and savings, are protected if their business should become insolvent.

Nobody wants to think about debts, but the fact of the matter is that it’s always been a part of business (and likely always will be!). Sometimes, debt can become insurmountable for a limited company or a sole trader, but is a company director liable for its debts? 

Personal Guarantee backed loans risk being dismissed in favour of credit cards and overdrafts

You can be doing lots of business, but still be relatively cash poor. The late payment of invoices makes cash flow a real issue for SMEs who, having done the work and paid for supplies, are left to wait to receive the revenues for the labour.

• -  70% of start-ups seek new finance in 2021
• -  Savvy entrepreneurs protect £35m in loans through personal guarantee       insurance
•  

July 2021: As ONS data shows an unprecedented rise in new company registrations in Q1 2021 versus Q1 2020[i] continuing a trend seen in 2020 - ‘the year of the start-up’[ii] - our latest survey has revealed that 70% of start-ups[iii] have secured or are planning to secure finance in 2021 to help support cashflow. Amongst these businesses, 37% of the owners or directors surveyed have already signed Personal Guarantees in 2020 to access finance, raising fears of loan stacking and multiple personal guarantees signed by one individual.

Directors may choose to voluntarily dissolve a business for a range of reasons, such as the retirement of the owner, the end of the useful life of the company from a legal perspective, or simply because it proved to be an unsuccessful venture. It’s the simplest and most cost-effective way to close a private limited company – but it isn’t always as straightforward as many directors hope it would be.

July 2021: The final COVID loans data released by the Government this week[i] failed to provide clarity on the total value of loans which required the business owner or director to sign a Personal Guarantee, putting their personal assets at risk if the business fails. Based on a Freedom of Information[ii] request made by our MD, it is estimated that 8% of the value of all the CBILS loans advanced required a personal guarantee. This equates to £2.1bn in loans taken over the past year.

Fear of further lockdowns is number one worry for SMEs but 75% are optimistic about the year ahead

No business, big or small, has been able to escape the impact of the Covid-19 pandemic – with over a year of restrictions, lockdowns and uncertainty taking its toll.

June 2021: As many businesses face the financial impact of four more weeks before pandemic restrictions lift, small business owners who have become personal guarantors for CBILS loans over £250,000 are being warned that lenders will come to them first, if they default on the loan – not the Government.

June 2021: The personal financial risk of becoming a personal guarantor for a business loan has become a fact of life for 1 in 3 small business owners but it’s also a secret for 1 in 5. This is according to a new survey of 1000 SME business owners and directors^[i] by Purbeck Personal Guarantee Insurance, provider of the UK’s only Personal Guarantee Insurance.

-> Freedom of Information request exposes high personal risk to over 2,300 business owners

-> Average size of a Personal Guarantee backed business loan at the end of the Coronavirus Business Interruption Loan Scheme "CBILS" was £774k.

-> In total, £2.1 billion of CBILS loans were supported by Personal Guarantees.

-> SME business owners could be on the line for over £154k if their business fails.

-> Many SMEs will have ‘Topped Out’ on CBILS, preventing access to the Recovery Loan Scheme.

When it comes to business insurance, owners are typically well informed with products such as employers' liability insurance, public liability insurance and business interruption insurance. But if you have ambitions to grow your business, there are other types of insurance which should be in your thinking.

Credit cards and overdrafts prove to be lifelines for SMEs in Pandemic

• -> 54% of SMEs need to secure new finance in 2021, of these, 54% will apply for a loan through the Recovery Loan Scheme
•  
• -> 34% think the Government hasn’t done enough to support small businesses
•  
• -> 43% saw a fall of more than 25% in business income in 2020

Being a company director can take its toll. A new survey showed that up to half of business leaders were susceptible to stress and exhaustion – even when their company was doing well. For some directors, boardroom burnout can force them to consider resigning from the business.

Funding through Personal Guarantee backed loans could be only option.

Borrowing hit record levels in 2020 with almost half of the UK’s small and medium-sized businesses seeking out financial support – more than three times the level of the previous year – amid the coronavirus pandemic.

Interest on average Personal Guarantee backed loan through CBILS could reach £327,000.

The Office of Budget Responsibility has predicted a default rate of 40.4% on BBL and CBIL finance to SMEs, with £27.2 billion of loans expected to be written off^[i].  Purbeck Personal Guarantee Insurance, provider of the UK’s only Personal Guarantee Insurance to SME business owners and directors, is urging the 59%^[ii] of businesses revealed to have borrowed more than 20% of their turnover, to calculate their repayments and heed the insolvency warning signs.

Purbeck Personal Guarantee Insurance cautions SMEs over Personal Guarantee risks

Purbeck Personal Guarantee Insurance, provider of the UK’s only Personal Guarantee Insurance to SME business owners and directors has set out its Budget wish-list to the Chancellor of the Exchequer, Rishi Sunak to help struggling SMEs get through to the other side of the pandemic.

The Coronavirus crisis and subsequent lockdowns have hit the UK’s economy hard. While the government has introduced financial support for businesses to help them get through the period safely, these will end in 2021. Deloitte UK predicts that there could be a backlog of insolvencies.

• • CBILS loans worth £1.22bn revealed to have Personal Guarantee attached, average loan 300% more than UK house value at £766,000:

  • -> Freedom of Information request exposes high personal risk to SME owners
  • -> Average loan value £766,000
  • SME business owners could be on the hook for over £150,000 if their business fails
  • -> 39% of SMEs not aware of Personal Guarantee risks[i]
  • -> Concerns over size of loan repayments and awareness of personal guarantee risks

The Government’s fiscal measures introduced in response to the shock of the pandemic – in particular the Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS) – have helped to bridge the revenue gap for many viable businesses that might have otherwise found themselves in jeopardy.

• A survey of SME workers[i] has found that close to 2 out of 3 people (65%) have suffered from mental health issues as a direct outcome of the pandemic, with women suffering marginally more than men.

While the government’s support measures have undoubtedly helped businesses with their cash flow during the Covid-19 crisis, this rescue action could impact the lending market moving into 2021 and beyond.

• A Personal Guarantee will be unavoidable for many small business owners in 2021, as coffers run dry:

• -> New COVID Loan Programme may reinstate personal guarantees
• -> 22% of small businesses sustained by salary sacrifice or personal savings

• In a new survey of SME workers, by Purbeck Insurance Services, provider of the UK’s only Personal Guarantee Insurance, found: -
•  
• -> 26% say loyalty has improved 
• -> 38% feel positive about career prospects 
• -> 12% of bosses sacrificed salary to support business 

• -> 29% want to kiss goodbye to Zoom 

A snap survey of people working in small businesses across the UK^[i] has found that 65% have made a deliberate decision to support other small businesses during the pandemic and plan to do so this Christmas as far as possible. Marginally more women than men are key advocates of local, small businesses.

With talk of a potential vaccine roll-out gathering pace, we can begin to consider what business life will look like after COVID-19. One thing’s for sure, it’s going to be markedly different from what life looked like before the pandemic, with some people dubbing the next phase the ‘new normal’.

• Small business owners facing failure also face increased risk of losing their home.

• The value of personal guarantee backed business loans to SMEs during the pandemic has risen on average by 45% according to analysis by Purbeck Insurance Services, provider of the UK’s only Personal Guarantee Insurance.

No company director wants to have to face up to the prospect of their business becoming insolvent. But directors have a duty to act in a certain way, in accordance with the relevant legislation, should their company find itself in a position where it can no longer pay its debts.

• 1. Applications for Personal Guarantee Insurance double[i] in September 2020 as lenders pull back from emergency loans

• • More than one million small businesses have successfully applied for a government-backed Bounce Back loan since the scheme was introduced at the start of May, according to figures from the Treasury.

    The initiative has handed out loans worth more than £30 billion as SMEs attempt to drive their businesses forward during these testing times.

• • A new survey of commercial finance brokers[i] supporting the UK’s small businesses suggests thousands of firms will be clamouring for business loans as the government support measures ease back:
  •  
  • -> 88% of SME finance brokers anticipate rise in demand for loans as support measures ease
  • -> 87% expect rise in business owners having to sign Personal Guarantees to get access to cash

• A rise in start-ups born during the pandemic^[i] is hugely positive but also not surprising. We’ve had more time to think and do and explore new avenues, particularly where existing business models or employment have ceased to exist. Necessity truly is the mother of invention. But while the pandemic has created new opportunities, the lending environment for start-ups looks set to be challenging.

• ‘Keep your hands off my home’ - Start-ups get cash injection of £25 million without risk of personal guarantee

• For smaller businesses across the UK, the government has introduced a favourable lending package to help firms get access to the funds they need to survive the coronavirus crisis. The Coronavirus Business Interruption Loan Scheme (CBILS) is available via British Business Bank-accredited lenders including high-street banks and smaller specialist lenders until 30 September 2020.

• Personal cost of Pandemic to business owners is high but optimism for the future prevails

• -> 80% of SME bosses have been open and honest about state of finances with workers
• -> 1 in 5 SME owners have put their home up for security for a business loan
• -> 18% of SME bosses took a pay cut, 14% have not paid themselves
• -> 78% of SME workers felt their employer has supported their mental health
• -> 48% confident about their job prospects, 26% pessimistic
•  

• Matthew Cole of TJ Vickers urges traders to get protected if they have to sign a Personal Guarantee

• Purbeck Insurance Services, provider of the UK’s only Personal Guarantee Insurance solution is warning the owners and directors of specialist and small-scale manufacturing businesses that they may find their finance options severely limited unless they put their personal assets such as their home and savings, on the line. 

• Purbeck responds to the R3^[i] survey of insolvency and restructuring experts that found 8 in 10 respondents expect personal insolvency numbers to increase within the next 12 months with 74.2% expecting this to be related to business failure as a result of Personal Guarantees.

• The Trade Credit Insurance guarantee should mean many small businesses, particularly those in the construction and manufacturing sectors can continue to access affordable insurance to support trading with other businesses and provide confidence within the supply chain.

•  Purbeck’s tips for stress testing business finances

• Purbeck Insurance Services, provider of the UK’s only Personal Guarantee Insurance solution has welcomed the Job Retention Bonus but fears this will be too little too late for small businesses reaching the end of their cash reserves as the furlough scheme ends in October 2020.

• Purbeck Launches COVID-19 Help Guide for SMEs

There are many finance options out there for SMEs which need loans to get started or to grow. But how do you qualify for a business loan?

Few SMEs have enough cash within their organisation to self-fund growth. So, for many, the real option is to seek external finance.

It is possible that the personal guarantee you signed is no longer enforceable. Find out your options for challenging personal guarantees to avoid the threat to your personal assets.

• It is estimated that over 420,000 small business owners in the UK are acting as personal guarantors for business loans and could be facing the risk of losing their home due to the impact of Covid-19.  

• The number of small business owners applying for insurance to protect their personal assets if their business fails, has jumped 84% from the first week of February and the volume of applications over the whole month have almost doubled compared to February 2019. 

When faced with the prospect of signing a personal guarantee, it’s important that you know all the potential implications should the bank or financial lender look to enforce that guarantee against you, such as in cases of insolvency through liquidation or administration.

Size of personal guarantees rises 32%

Budget must help small businesses old and new. Purbeck Insurance Services, the provider of personal guarantee insurance has revealed a trend in the owners of small businesses established in the height of the financial crash in 2007-2008 who are now having to put their personal assets on the line to secure finance for their business.

46% never switch off from work

8 out of 10 small business chiefs come clean when they put the home on the line

Money worries can be the biggest cause of relationship woes but recent research by Purbeck Insurance Services, the provider of Personal Guarantee Insurance has found that most small business owners do the right thing and come clean to their partner when they take the big step of putting the family home on the line for their business.  8 out of 10 small business owners[i] have informed their partner about a personal guarantee they have signed for new business finance. 

• Uncertainties about the economic outlook in 2019, including those related to Brexit, meant UK businesses deferred spending and investment until they had more clarity about the future trading environment. Will firms see more cause for optimism in 2020?

Are you one of the millions of small business owners who have secured a loan by signing a personal guarantee without realising the implications?

Adding Personal Guarantee Insurance to the mix of small business services

Accountants are on the front line when it comes to understanding the financial pressures facing the UK’s small businesses.  Late payment, managing cashflow, the Brexit deadlock are all making business harder for the directors and owners of SMEs and it’s often access to finance that determines a business’s fate, particularly in the early years.  

• Purbeck Insurance Services fully supports the new bill to clampdown on late payment in the construction sector which has such a negative impact on subcontractors in this market. Our own survey of the market has shown that 35% of small businesses in the construction sector find managing late payment the hardest thing about running their firm.

• Burnout beckons for female small business leaders – 46% never switch off compared to 38% of male leaders

• - Bosses aged 35-44 in Property Development, Construction and Legal Services least able to switch off from work
• - East Midlands is worst for ‘switching off, Scotland is best
• - Employers of 10-49 people have most difficulty switching off

• Technology will continue to drive innovation in small business finance. The days of making an appointment with the bank manager is becoming a thing of the past.  Technology is making the process more streamlined, speeding lending decisions and access to finance for small businesses. In 2020, Open Banking and the ability to draw information from accounting software will give lenders and financial intermediaries a wealth of information that will enable them to provide focused credit solutions.
•  
• Peer to peer business lending will continue to grow in 2020. P2P lenders will play a valuable role in providing access to credit for small businesses – particularly those who have not been able to access high street bank funding.  This will fill the funding gaps for underserved businesses and will help underpin many new start-ups in the year ahead.
•  
• New rules concerning who gets paid in what order in an insolvency could also support growth in Peer to Peer lending. In April 2020, HMRC will become a preferred creditor in a business insolvency for certain HMRC debts[i]. These changes will encourage traditional lenders to consider their risk exposures.  This may lead to a tightening of credit and/or credit at more expensive interest rates due to the preference of HMRC over floating asset and unsecured creditor positions.
•  
• There will be a continued reliance on financial intermediaries such as accountants and finance brokers in 2020 as small businesses seek expert support to determine their best finance options. There will be a particular demand from those businesses who have not been able to secure finance from high street banks.
•  
• Collaboration between banks, alternative finance providers and policymakers will ramp up to ensure that businesses have access to critical funding lines, particularly if the UK leaves the EU without a deal.
•  

Following news that business birth rates have fallen[i], Purbeck, the provider of the UK’s only personal guarantee insurance solution for the owners and directors of UK SMEs, is urging small businesses to build their financial resilience for 2020 to help maximise opportunities to grow.  In a survey by Purbeck, 70%[ii] of small business owners said Brexit uncertainty had made their business harder over the past year and the burden of managing cashflow is one of top five hardest things about running a business. 

At the same time, lenders are demanding more security from business owners and directors for new finance deals – in a recent survey of finance brokers by Purbeck, 49%[iii] reported an increase in demand for personal guarantees in the past year.

Survey reveals demand for personal guarantees from lenders rises by nearly 50% in past twelve months

Lenders are increasingly asking SMEs for personal guarantees to secure business finance a survey[i] has revealed. The survey of commercial finance brokers undertaken by Purbeck, the UK’s only personal guarantee insurance solution for the owners and directors of UK SMEs, found 47% of respondents said they had seen a rise in demand for personal guarantees as part of a new business finance package, in the past year.

A survey of commercial finance brokers[i] undertaken by Purbeck, the UK’s only personal guarantee insurance solution for the owners and directors of UK SMEs, has uncovered an increasing demand by lenders for personal guarantees to secure business  finance.  

In the survey, 47% of brokers said they had seen a rise in demand for personal guarantees as part of a new business finance package, in the past year.  This is further evidenced by the fact that Purbeck saw a 173% year on year increase in demand for personal guarantee insurance in October 2019, with a record peak that month in new policies underwritten.

Now more than any time since the last recession, small businesses need the confidence to borrow

Purbeck Insurance Services, provider of the UK’s only Personal Guarantee Insurance solution for the owners and directors of small businesses has welcomed the suggestion made by Andrew Bailey, CEO, Financial Conduct Authority in a recent report, to bring regulation into small business lending.

Finance warning to UK’s small business owners as Brexit uncertainty continues

• - 70% of small business owners say Brexit uncertainty has made business harder
• - Long hours and pressure on family life some of the hardest aspects of running your own business
• - Small business owners cautioned on taking loans that will put personal finances at risk – 43% arrange funding without seeking independent advice

It’s a buzz running a small business, but as a Director of a growing business, I have a fairly good idea of what can keep other small business owners awake at night.  Cashflow.

Whether it’s getting money in, paying it out or finding new sources of investment, managing finances can be a headache.  So when business owners are faced with the challenge of finding extra cash quickly, where do they go?

As Britain’s top banks reaffirm their commitment to back British business through access to finance, ahead of Brexit[i], Purbeck Insurance Services is urging small business owners not to be deterred by a Personal Guarantee to secure access to funding but to look at ways they can mitigate the risk. In a survey by Purbeck[ii], over 1 in 10 small business owners (12%) said they’d decided against taking out a business loan because it included a Personal Guarantee.  

Purbeck Insurance Services is the UK’s only insurance provider to offer Personal Guarantee Insurance.

Demand for Personal Guarantee Insurance from small businesses who have secured finance from Peer to Peer lenders such as Funding Circle rose 40% in the first six months of 2019 compared to H2 2018.    Analysis by Purbeck Insurance Services, the UK’s only insurance provider to offer Personal Guarantee insurance also found that the number of small businesses seeking personal guarantee insurance for unsecured loans has risen 58% in the same period. 

In the first six months of 2019, the number of small business owners and directors who purchased Personal Guarantee Insurance for a Personal Guarantee backed finance deal rose 23%, compared to the previous six months.  Most small business owners buy protection for loans of £25,001-£50,000 and the demand for insurance protection for this bracket has grown 38% in H1 2019.  However, the number of policies for loans of £50,000-£75,000 has risen by 138% over the same half year period.

If you are one of the many small businesses that have turned to P2P lending to help fund your business, the news concerning the mixed fortunes of these platforms may be giving you pause for thought.  P2P lending platforms have become a valuable route to cash for small businesses.  However, it appears that the well-publicised collapse of firms such as Lendy is making small businesses more focused on the risks, particularly where a Personal Guarantee has been signed to secure the funding.

• When making a commercial credit application, in order to inject funds into your business, there’s every chance that you’ll be required to provide a personal guarantee. If you’ve never been through the process before you may be unaware of the implications of doing so and therefore unable to make an informed decision.

  By the end of this article, you’ll understand what it means to sign a personal guarantee, why lenders require it and how you can mitigate your risk.

• When making a commercial credit application, in order to inject funds into your business, there’s every chance that you’ll be required to provide a personal guarantee. If you’ve never been through the process before you may be unaware of the implications of doing so and therefore unable to make an informed decision.

  By the end of this article, you’ll understand what it means to sign a personal guarantee, why lenders require it and how you can mitigate your risk.

• We recently interviewed 500 SME business owners and here is what they had to say...

• Going off the name alone, a secured business loan can sound like the less risky option when trying to obtain some additional funding for your company. But it is less of a risk for the lender, as they are sanctioned on the condition that the borrower offers business assets as ‘security’.

  
  

  Typically, the borrowing business will put forward a company asset such as property, land or equipment. This means the loan is ‘secured’ against one or more of these assets, which the lender can take if a business stops making repayments.

• Late payment problems have worsened for 27% of UK SMEs^[i] according to research conducted by Purbeck Insurance Services, the UK’s only insurance provider to offer Personal Guarantee insurance.   29% are experiencing worsening cashflow problems and 30% of UK SMEs are finding access to finance has become harder in the past twelve months.  The findings have been revealed as the UK Government confirms it is proposing new measures to stamp down on late payments to small business.[ii]

• Purbeck Insurance Services, the UK’s only insurance provider to offer Personal Guarantee insurance, has revealed that nearly three quarters of SMEs (74%) would be more likely to take out a loan with a Personal Guarantee if they could insure against the risk of providing it.   The most common reasons businesses want to take out a loan are to improve cashflow (28% of respondents) and acquire new equipment (27%).

• The British Business Bank Small Business Finance Markets Report[i] recently highlighted that while Solicitors rank second to Accountants when SMEs seek advice on new finance, the likelihood of SMEs seeking external advice has grown year on year – the study found that 47% are very likely to pay for independent advice to help them obtain finance. The report also identified a small but significant jump in the percentage of SMEs aiming to grow substantially in 2019.  While many business want to focus efforts on debt recovery to aid cashflow, the proportion of SMEs seeking external finance has remained stable with an uplift amongst micro businesses. 

• A Personal Guarantee puts your personal assets such as your home and savings on the line to settle a debt if you default on the loan

• The 2019 British Bank Business Report[i] paints a worrying picture of the risks small businesses take to secure finance for their business. 

Personal Guarantee insurance can support a solicitor’s duty of care to the directors and owners of SMEs

You need to be a very confident person to put up your personal estate as collateral when taking out a loan. Some business directors will sign a Personal Guarantee even if it makes them feel uncomfortable. For others, it’s deemed too much of a risk.

• SMEs endeavouring to plan for Brexit will be looking carefully at cash-flow to gauge how much pressure they can take without additional borrowing.  The main concern is that day to day running costs will rise – this might be due to material costs going up, wage bills increasing as the migrant workforce reduces and higher warehousing costs for stockpiled goods. 

• More than 1 in 4 UK SMEs are planning to raise finance just to keep their head above water a new survey^[i] has revealed. The research carried out by Purbeck Insurance Services, the UK’s only insurance provider to offer Personal Guarantee insurance found 28% plan to use finance to improve cash flow and this is currently the main reason for securing a business loan or new form of finance.

As predictions have emerged of an upsurge in borrowing demand from SMEs[i] if a ‘no deal’ Brexit occurs, owners of small businesses are being urged to fully acquaint themselves with the terms of a personal guarantee backed loan, before signing on the dotted line.

• Purbeck Insurance Services, the UK’s only provider of Personal Guarantee Insurance offers tips on the facts to check when raising finance through a personal guarantee backed loan.