Small business owners surge in seeking insurance

As reported by London Loves Business, October 2023 witnessed a historic surge in small business owners seeking insurance protection against personal guarantees, with reports of a 60% increase

As high street banks reduce their funding appetite, SMEs are turning to the alternative lending market where personal guarantees are a common requirement for unsecured loans. Purbeck’s analysis shows that in October 2023, there was a 60% rise in small business owners taking personal guarantee insurance (PGI), to protect their personal assets should their business fail, following a new business loan that had a personal guarantee attached.

Todd Davison, MD of Purbeck Personal Guarantee Insurance said, “In the six years we have been in operation, we have never seen the demand we are experiencing now for protection against the risk of signing a personal guarantee.

“While some of this can be explained by increased awareness of PGI, it also demonstrates how challenging it has become for small business owners to secure business loans via traditional routes.

“We know most small businesses are seeking finance simply to keep their heads above water as working capital remains the top reason for new loans – 47% of applications were for this purpose, up from 37% in Q3 2022.

“As the routes to funding narrow, it is vital small business owners seek advice and support from a commercial finance broker. Taking on longer term finance to pay short term creditor obligations could create a spiral of debt and ultimately lead to further business insolvencies.”