Headline Figures:
- The number of SME owners securing personal guarantee insurance (PGI) for a business loan doubled in September 2023 compared to the same month in 2022.
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- September was also a peak month for PGI applications since March this year.
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- SME business owners are now taking on loans that are on average £388,494 from £357,016 in Q3 2022 - an increase of close to 9%.
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- This is a fall though on Q1 2022 when the average loan peaked at £644,672.
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- Looking at the whole of Q3 2023, applications for PGI rose by 32% vs Q3 2022
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- Working capital remains the top reason for new loans - 47% of applications were for this purpose, up from 37% in Q3 2022.
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- The main source of funding is unsecured loans - Purbeck saw more applications for PGI in respect of unsecured loans than at any time previously, in Q3 2023.
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- The average property development SPV loan is now £484,860 compared to £362,694 in Q3 2022, an increase of circa 33.5%.
October 2023: This September, the number of SME business owners applying for insurance for personal guarantee backed finance for their business, doubled on September 2022 according to the Purbeck Personal Guarantee Insurance Monitor for Q3 2023. September was also a peak month for Personal Guarantee Insurance applications in 2023, following a record high recorded in March 2023. Applications fell dramatically in April 2023 however, suggesting caution amongst business owners to take on new finance but have been rising steadily since then. The latest data suggests that confidence is rising amongst SMEs despite continued inflationary pressures.
Commentary: Todd Davison, MD of Purbeck Personal Guarantee Insurance said: “The rise in demand for insurance for personal guarantee backed loans points to a rise in confidence amongst SMEs after a noticeable dip in the Spring. It does suggest that small businesses applying for loans are adapting to the challenging economic environment and fortifying their cashflows, given the majority of loans are for working capital. While commercial mortgages have become less attractive to business owners, based on our data, unsecured loans have risen in popularity as an accessible alternative source of finance for those businesses that need it.”
About PGI: Personal guarantee insurance (PGI) is a product used by small business owners to protect against the risk of a personal guarantee being called in for a business loan. Lenders will ask for a personal guarantee when there are not enough assets in the business to repay the loan if the business fails. The Purbeck Personal Guarantee Insurance Monitor is the only source of data on the number and size of personal guarantee backed loans being secured by small business owners where insurance has been taken to protect against the risk of the loan being called in.
