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. 

In fact, although loan values have fallen, the personal guarantee amount being demanded by lenders as security has grown.  Purbeck’s analysis shows that Personal Guarantee commitments are now on average £124,992 up from, £84,942 in 2021.  To help mitigate the personal risk this poses, founders of startups are insuring on average £113,492 through Personal Guarantee Insurance compared to £72,768 in 2021.

In contrast, the number and value of property development loans have reached their highest level in 2022 based on Purbeck’s analysis. The average loan for a property development is now £2,274,321.  

As a consequence, property development personal guarantees are now on average £752,080 and Property Development directors are insuring on average £350,000 through Personal Guarantee Insurance, from £150,000 in 2021.

Todd Davison, our MD said: “The fall in the value and number of personal guarantee backed finance deals for startups is a worrying trend for our economy.  Our analysis suggests startups are now being asked to offer a personal guarantee on around 87% of the loan.  That is going to be a step too far for some given the headwinds the UK is facing.  For comparison, over the past 5 years, the average personal guarantee backed finance amount secured by start-up founders for working capital has been £221,796 and the average personal guarantee amount over this period has been less than half this amount at close to £99,000.  Our analysis certainly reinforces the importance of personal guarantee insurance to help mitigate this growing risk.”