News

• -    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. 

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.

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• -     123% year on year increase in business loans secured with personal guarantee attached
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• -     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.”