June 2021: The personal financial risk of becoming a personal guarantor for a business loan has become a fact of life for 1 in 3 small business owners but it’s also a secret for 1 in 5. This is according to a new survey of 1000 SME business owners and directors[i] by Purbeck Personal Guarantee Insurance, provider of the UK’s only Personal Guarantee Insurance.
-> Freedom of Information request exposes high personal risk to over 2,300 business owners
-> Average size of a Personal Guarantee backed business loan at the end of the Coronavirus Business Interruption Loan Scheme "CBILS" was £774k.
-> In total, £2.1 billion of CBILS loans were supported by Personal Guarantees.
-> SME business owners could be on the line for over £154k if their business fails.
-> Many SMEs will have ‘Topped Out’ on CBILS, preventing access to the Recovery Loan Scheme.
When it comes to business insurance, owners are typically well informed with products such as employers' liability insurance, public liability insurance and business interruption insurance. But if you have ambitions to grow your business, there are other types of insurance which should be in your thinking.
Credit cards and overdrafts prove to be lifelines for SMEs in Pandemic
- -> 54% of SMEs need to secure new finance in 2021, of these, 54% will apply for a loan through the Recovery Loan Scheme
- -> 34% think the Government hasn’t done enough to support small businesses
- -> 43% saw a fall of more than 25% in business income in 2020
Interest on average Personal Guarantee backed loan through CBILS could reach £327,000.
The Office of Budget Responsibility has predicted a default rate of 40.4% on BBL and CBIL finance to SMEs, with £27.2 billion of loans expected to be written off[i]. Purbeck Personal Guarantee Insurance, provider of the UK’s only Personal Guarantee Insurance to SME business owners and directors, is urging the 59%[ii] of businesses revealed to have borrowed more than 20% of their turnover, to calculate their repayments and heed the insolvency warning signs.
Purbeck Personal Guarantee Insurance, provider of the UK’s only Personal Guarantee Insurance to SME business owners and directors has set out its Budget wish-list to the Chancellor of the Exchequer, Rishi Sunak to help struggling SMEs get through to the other side of the pandemic.
The Coronavirus crisis and subsequent lockdowns have hit the UK’s economy hard. While the government has introduced financial support for businesses to help them get through the period safely, these will end in 2021. Deloitte UK predicts that there could be a backlog of insolvencies.
CBILS loans worth £1.22bn revealed to have Personal Guarantee attached, average loan 300% more than UK house value at £766,000:
- -> Freedom of Information request exposes high personal risk to SME owners
- -> Average loan value £766,000
- SME business owners could be on the hook for over £150,000 if their business fails
- -> 39% of SMEs not aware of Personal Guarantee risks[i]
- -> Concerns over size of loan repayments and awareness of personal guarantee risks
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