Size of personal guarantees rises 32%

Budget must help small businesses old and new. Purbeck Insurance Services, the provider of personal guarantee insurance has revealed a trend in the owners of small businesses established in the height of the financial crash in 2007-2008 who are now having to put their personal assets on the line to secure finance for their business.

46% never switch off from work

8 out of 10 small business chiefs come clean when they put the home on the line

Money worries can be the biggest cause of relationship woes but recent research by Purbeck Insurance Services, the provider of Personal Guarantee Insurance has found that most small business owners do the right thing and come clean to their partner when they take the big step of putting the family home on the line for their business.  8 out of 10 small business owners[i] have informed their partner about a personal guarantee they have signed for new business finance. 

• Uncertainties about the economic outlook in 2019, including those related to Brexit, meant UK businesses deferred spending and investment until they had more clarity about the future trading environment. Will firms see more cause for optimism in 2020?

Are you one of the millions of small business owners who have secured a loan by signing a personal guarantee without realising the implications?

Adding Personal Guarantee Insurance to the mix of small business services

Accountants are on the front line when it comes to understanding the financial pressures facing the UK’s small businesses.  Late payment, managing cashflow, the Brexit deadlock are all making business harder for the directors and owners of SMEs and it’s often access to finance that determines a business’s fate, particularly in the early years.  

• Purbeck Insurance Services fully supports the new bill to clampdown on late payment in the construction sector which has such a negative impact on subcontractors in this market. Our own survey of the market has shown that 35% of small businesses in the construction sector find managing late payment the hardest thing about running their firm.

• Burnout beckons for female small business leaders – 46% never switch off compared to 38% of male leaders

• - Bosses aged 35-44 in Property Development, Construction and Legal Services least able to switch off from work
• - East Midlands is worst for ‘switching off, Scotland is best
• - Employers of 10-49 people have most difficulty switching off

• Technology will continue to drive innovation in small business finance. The days of making an appointment with the bank manager is becoming a thing of the past.  Technology is making the process more streamlined, speeding lending decisions and access to finance for small businesses. In 2020, Open Banking and the ability to draw information from accounting software will give lenders and financial intermediaries a wealth of information that will enable them to provide focused credit solutions.
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• Peer to peer business lending will continue to grow in 2020. P2P lenders will play a valuable role in providing access to credit for small businesses – particularly those who have not been able to access high street bank funding.  This will fill the funding gaps for underserved businesses and will help underpin many new start-ups in the year ahead.
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• New rules concerning who gets paid in what order in an insolvency could also support growth in Peer to Peer lending. In April 2020, HMRC will become a preferred creditor in a business insolvency for certain HMRC debts[i]. These changes will encourage traditional lenders to consider their risk exposures.  This may lead to a tightening of credit and/or credit at more expensive interest rates due to the preference of HMRC over floating asset and unsecured creditor positions.
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• There will be a continued reliance on financial intermediaries such as accountants and finance brokers in 2020 as small businesses seek expert support to determine their best finance options. There will be a particular demand from those businesses who have not been able to secure finance from high street banks.
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• Collaboration between banks, alternative finance providers and policymakers will ramp up to ensure that businesses have access to critical funding lines, particularly if the UK leaves the EU without a deal.
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Following news that business birth rates have fallen[i], Purbeck, the provider of the UK’s only personal guarantee insurance solution for the owners and directors of UK SMEs, is urging small businesses to build their financial resilience for 2020 to help maximise opportunities to grow.  In a survey by Purbeck, 70%[ii] of small business owners said Brexit uncertainty had made their business harder over the past year and the burden of managing cashflow is one of top five hardest things about running a business. 

At the same time, lenders are demanding more security from business owners and directors for new finance deals – in a recent survey of finance brokers by Purbeck, 49%[iii] reported an increase in demand for personal guarantees in the past year.