March 2024: As the FCA outlines its plan to address the Federation of Small Business’ super-complaint regarding the use of personal guarantees on small business loans, Todd Davison, MD of Purbeck Personal Guarantee Insurance says: 

“It is good to see that the FCA has kicked off an investigation into the use of personal guarantees for business loans to the sole traders and small partnerships within their remit.

“Personal guarantees need to be proportionate and appropriate so it will be interesting to see the outcome of the FCA’s investigations, including the number of complaints received by the Ombudsman.

“From our experience supporting limited companies rather than sole traders, around 24% of personal guarantees are for loans that are under £50,000 in value. We also know that personal guarantees have become an almost unavoidable part of securing a small business loan. Looking at the whole of 2023 vs 2022, there has been a 67.5% rise in applications from the directors/managers of limited companies for personal guarantee insurance. These people are using insurance to share some of the risk, improve their confidence to take finance and allow them to pursue growth opportunities.

“If the FCA’s investigations ultimately provide some guidelines to encourage good lending practices including the request for personal guarantees, that can only be a good thing.”