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Why Personal Guarantee Insurance Matters Now More Than Ever

Posted by Todd Davison on May 14, 2024 1:00:00 PM

In today's rapidly changing economic environment, protecting your assets has become more than just a preventative measure; it's now a necessity.

The UK economy has weathered many challenges in recent years, such as increasing interest rates, rising energy costs, and a widespread cost of living crisis, which have affected businesses of all sizes across all sectors.

Business owners face many struggles, especially the risks associated with securing business loans with personal guarantees, which can put their personal assets in danger. In such uncertain times, it is essential to take proactive measures to protect yourself from personal liability.

One often overlooked yet crucial measure for asset protection is personal guarantee insurance (PGI).

In this blog, we discuss how PGI is a crucial strategy for safeguarding your assets, especially during economic uncertainty.

 

Understanding personal guarantee insurance (PGI)

A personal guarantee is a legally binding contract signed by a director or partner of a business during a loan application process. It is a pledge to repay credit issued to their business.

Personal guarantees are considered as "added security" for lenders, protecting them from business insolvency and unpaid debt. For many small and medium-sized enterprises (SMEs), personal guarantees can be a useful method of securing crucial business finance that they may not have had access to otherwise.

However, as a business owner or director, signing a personal guarantee means that you are placing your personal assets, such as your savings, property and possessions, at significant risk. If your business cannot repay the loan, you could personally suffer the consequences.

That’s where Personal Guarantee Insurance comes in.

PGI is a policy that acts as a safety net if your business cannot fulfil its financial obligations. The policy covers 80% of the value of the assets you have used to secure your business loan, allowing you to access finance essential to your business growth, all while protecting your personal assets.

In such uncertain times, you never know what event is around the corner that could negatively impact your business and its profitability.

By investing in PGI, you can reduce the risk to your personal estate, enabling you to focus on running your business with peace of mind.

 

Why PGI Matters Now More Than Ever

Investing in a PGI policy to safeguard your assets is always wise. However, there has never been a more important time to prioritise adding an extra layer of security to your personal guarantee. Here are the three key reasons why you should consider securing PGI today:

 

-    Economic volatility

Right now, the UK economy is in a constant state of flux. Many businesses are finding it difficult to stay afloat. In fact, insolvency rates have risen by 23% compared to 2023.

No matter how hard you work, or how successful you have been in the past, the survival of your business depends on factors that are beyond your control. With PGI in place, you can weather these uncertainties and safeguard your assets from unforeseen financial burdens.

 

-    Rising business risks

The current economic climate is growing more complex than ever with multiple factors to consider. Businesses are faced with challenges such as supply chain disruptions, regulatory changes, and market fluctuations, all of which can have a significant impact on their success.

Delays in receiving materials, compliance costs from regulations, and market instability all affect revenue and operational efficiency. Non-compliance risks penalties, while economic downturns impact consumer demand and competition. PGI can act as a shield against these risks.

 

-    Lender scrutiny

It's becoming increasingly difficult for small businesses to access finance. Lenders are scrutinising business loan applications more closely, only approving those that have a personal guarantee in place.

Having PGI in place not only protects your assets but also demonstrates responsible risk manageability, increasing your credibility with lenders.

 

Choose Purbeck for Personal Guarantee Insurance

At Purbeck, we understand the risks signing a personal guarantee can expose you to, placing your assets and wellbeing at stake. That’s why it’s essential to partner with a PGI provider that you can trust.

Having honed our expertise as industry specialists in PGI over many years, we've collaborated with businesses spanning various sizes and sectors.

This extensive experience has provided us with deep insights into the unique needs and challenges faced by businesses and their directors, allowing us to provide bespoke PGI solutions that align with your circumstances.

 

Safeguard your assets during uncertain times with PGI from Purbeck

Purbeck is the UK’s sole provider of PGI, with policies that cover up to 80% of the assets used for your personal guarantee.

If you have any further questions about our PGI policies or would like to receive tailored advice, don’t hesitate to get in touch with a member of our team today; we’re on hand to help.

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