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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
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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.”

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.