Personal Guarantee protection paid off for Sunbed salon directors after long hot summer

April 2019: Following one of the warmest Februaries on record, and with warnings that easter eggs may need to be kept in the fridge this year the owners and directors of UK SMEs are being urged to consider the protection they can take against the negative impact unseasonal weather can have on their business and the risk this might pose to their personal assets.

The collapse of a sunbed business in Milton Keynes following 2018’s long hot summer demonstrates how the finest weather can spell bad news for business. Fortunately the directors of the business had the foresight to take Personal Guarantee insurance from Purbeck Insurance Services, the UK’s only provider of this type of insurance. Last summer, Purbeck saw a 200% year on year increase in businesses applying for Personal Guarantee insurance, indicating that they may have been concerned about trade.

With the current uncertain economic climate adding to any challenges created by the weather related climate, Purbeck is encouraging company directors to factor in the risk of a personal guarantee, signed in support of a business loan, being called in by the lender, with the potential loss of personal assets such as their home or savings.

Case Study

Summer 2018 was the joint hottest on record according to the Met office. But for many businesses, the blessing of weeks of unrelenting sunshine was a curse.

Sun Kiss Tanning – a sun-bed salon opened in Milton Keynes in March 2018. To support the start-up, the four directors secured personal guarantee backed finance amounting to £91,000. However, fully appreciating the risk taking a personal guarantee entails, with the potential loss of personal assets, the directors had the foresight to secure Personal Guarantee Insurance from Purbeck Insurance Services.

As the long hot summer progressed, the downturn in custom was marked. Despite positive customer reviews and valuable support from Purbeck to help attract custom, the business entered insolvency during September 2018.

However, because the directors had secured Personal Guarantee Insurance, their personal assets were protected. All the outstanding start-up finance was settled by Purbeck Insurance Services in November 2018, in accordance with the policy terms.

Paul Gornall, former director of Sun Kiss Tanning said: “Ironically we opened on one of the snowiest days of the year so many of those we had invited couldn’t get to us. Perhaps that was an early reminder of how little control we have over weather. Even so, we could never have anticipated such a prolonged spell of sunshine filled days.

“When we started looking into Personal Guarantee backed finance to fund the opening of the salon, we knew the personal risks we would be taking so when we came across Purbeck Personal Guarantee Insurance it made sense to secure the cover as part of the finance deal – as such the premium was paid for by the business. Although we hoped we’d never need it, the cover offered valuable peace of mind that if something did go wrong, there would be limited impact on our personal finances.

“When we alerted Purbeck to the situation, they offered great advice and support but sadly we just couldn’t keep the business afloat. It was a very stressful time but it could have been considerably worse if we hadn’t taken Personal Guarantee Insurance.”

Todd Davison, Director at Purbeck Insurance Services said: “Sun Kiss Tanning really demonstrates how circumstances completely beyond a business’s control can have such a negative impact on trade.

This is why those firms using Personal Guarantee backed finance should have insurance in place to protect them against the risk of their personal assets being used to settle an outstanding loan. No business wants to fail but it’s sensible, particularly in these uncertain times with insolvencies rising, and payouts to help UK firms survive unpaid bills now at their highest since 2009, to prepare for the worst rather than just hope for the best.”

If you’d like more information on how Personal Guarantee Insurance works or, if you’d like to speak to one of our advisors, please call 0208 004 7250.