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

2. 

Following reports that many financial institutions have cut access to the state-backed loans, even though the scheme has been extended until the end of next November, Purbeck Insurance Services, provider of the UK’s only Personal Guarantee Insurance, has seen applications for Personal Guarantee Insurance for new business loans, double in the space of three weeks in September. This sudden increase in demand is a clear indication that small businesses are increasingly looking outside of the Government loan schemes for funding.

Purbeck is urging UK Government to do more now to protect small businesses from the scourge of late payment as it fears reduced access to emergency funding is going to lead to unprecedented levels of late payment and bad debt. 

Todd Davison, Managing Director of Purbeck Insurance said:

“We welcome the launch of the late payment consultation[i] but the remedies won’t be in place until we are well into the new year – this will be far too late for many small firms as they struggle to get the emergency finance they need right now. 

“Those small businesses who give up securing a government loan and start looking for funding independently could also see tighter restrictions and demands for personal guarantees in return for access to much needed cash.  It’s vital small businesses take measures to protect themselves from the risks of providing Personal Guarantees or we could see thousands of business owners losing their homes as well as their businesses.” 

Personal Guarantee Insurance is a relatively new type of insurance that offers protection against the risk of a Personal Guarantee being called by a lender and will offset any outstanding obligations called in under a Personal Guarantee following business failure. The level of cover is based on a fixed percentage of the Personal Guarantee the company director wishes to insure and this is dependent on whether the corresponding finance facility is secured or unsecured. In essence, if the business does fail, up to 80% of the loan will be settled by the insurance rather than the business owner’s home, savings and other personal assets being called on to settle the debt. 

[1] Applications for Personal Guarantee Insurance from Purbeck for a new business loan grew over 100% between 07/09/2020 and 28/09/2020

[ii] https://www.gov.uk/government/news/government-to-protect-small-businesses-with-action-on-late-payments