PGI Knowledge Centre

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
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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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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.