Personal guarantee-backed loans jump 125pc in second quarter



Purbeck Personal Guarantee Insurance recorded a 125 per cent year-on-year increase in personal guarantee-backed finance agreements during the second quarter of the year.

The UK’s only provider of personal guarantee insurance attributed the big jump in the volume of guarantee-backed finance agreements to small firms ploughing more cash into acquisitions and growth.

The insurer’s data provides insight into the finance that is being secured by UK small- and medium-sized enterprises (SMEs) with personal guarantees attached, where the risk to the business owners or directors’ personal assets is mitigated through insurance.

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During the first half of 2022, it said the volume of personal guarantee-backed finance
agreements was 81 per cent higher in comparison to the corresponding period in 2021.

Working capital was the most common reasons cited for why finance had been secured, followed by investment for growth and acquisition.

Unsecured loans remain the prime funding route, accounting for 37 per cent of business during the second quarter, down slightly from 39 per cent in the first quarter.

The average loan size also dipped 15.5 per cent to £150,682 during the second quarter.

Read more: Personal guarantee-backed loans rise as businesses battle rising costs

Todd Davison, managing director of Purbeck, said the significant year-on-year growth in the volume of personal guarantee-backed finance secured by SMEs was “welcome news” during a summer of political uncertainty and cost challenges.

“Now that the UK government has confirmed it is extending the Recovery Loan Scheme, for a further two years with personal guarantees remaining a core feature, business owners looking to take advantage of the scheme should think about how they can mitigate the risk,” he said.

“Personal guarantee insurance exists to protect the many small business owners who have taken the big decision to become personal guarantors whether lending is via a government-backed scheme or secured independently.”

Read more: P2P platforms predicted to request more personal guarantees