11.1 C
Monday, July 15, 2024

Small Business Owners Increasingly Turning to Personal Loans, Suggests New Research

According to a new survey, 69% of small business owners in the North West are unprepared for lender demands and are increasingly turning to personal loans.

The survey by highly-respected Purbeck Personal Guarantee Insurance, interviewed 1000 small business owners/managers across the UK. The findings suggest that many are unprepared for lenders’ increasing demands for security in return for business loans.

When asked what it means to be a personal guarantor for a business loan, across the board, only 33% of business owners answered correctly.  The findings of this survey have been revealed as wider new research shows that small business owners are turning to personal loans to fund their business.

17% of respondents to the Purbeck survey had no idea what a personal guarantee is, 19% were partially right in that it is a promise to the lender to pay off the loan but felt it would simply affect their credit rating if they failed to do so.  17% thought it is just when you allow the lender to assess your personal assets as part of the risk assessment and 14% thought it when you need to sign for the loan in your name rather than the business name.

Looking across the U.K., small businesses in the East Midlands and East Anglia were least likely to know what it means to be a personal guarantor – in fact none of the respondents in the East Midlands knew the correct answer -while those businesses in London and the South East were most likely to know.

In the North West specifically, more small business owners chose the correct answer over any other option provided, but still, only 31% know what it means to be a personal guarantor.  23% thought that if they failed to pay off the loan it would just affect their credit rating. Just 1 in 10 (11%) had no real idea.

More encouragingly, the younger the business, the more clued-up respondents appeared to be over personal guarantees. Drilling down to business age, of those who have been in operation for up to 3 years, 39% knew what it meant to be a personal guarantor and just 10% had no idea.

Todd Davison, MD of Purbeck Personal Guarantee Insurance said: “There is a £22bn funding gap for SMEs in the UK but one of the big hurdles to funding is the personal guarantee. As lenders have become more risk averse, the demand for PGs has increased. More awareness needs to be built around the risks and more importantly, how to mitigate those risks such as through Personal Guarantee Insurance, so that more small businesses have the confidence to access the funding they need to sustain or grow their business.

“We have seen the number of personal guarantee backed finance deals rise 123% on Q3 2021, so the funding is there for many firms but signing a personal guarantee is a big step, particularly in the midst of so much uncertainty.  We would urge directors and owners to prepare for the fact that they will be asked for security if there are not enough assets in the business, know what they are getting into and what they can do to reduce the risks – then there will be no nasty surprises.”



EURO 2024 Parimatch Sign Up Offer: Get 50/1 on England to beat Spain Free Bet

Football fans are no doubt eagerly awaiting the upcoming...

Spain vs England Free Bets: Betano 50/1 on England to Beat Spain Euro Finals 2024

With England advancing on their journey in the UEFA...

England vs Spain Free Bets: Get 50/1 on England to Win the Euros! – Euro 2024 BetVictor Sign-Up Offer

The country waits in anticipation as England prepares for...

Wimbledon 2024 final: Alcaraz through after win vs Medvedev

Holder Carlos Alcaraz held off world number five Daniil...

Subscribe to our newsletter

Business Lancashire will use the information you provide on this form to be in touch with you and to provide updates and marketing.

Don't miss

A stunning celebration evening for the NHS Apprenticeship Awards

The Lancashire & South Cumbria NHS Health & Social Care...

Public chance to have say on proposed pump track in Nelson

A consultation is being held for people to have...

EURO 2024 Parimatch Sign Up Offer: Get 50/1 on England to beat Spain Free Bet

Football fans are no doubt eagerly awaiting the upcoming...

Best Betting Apps for iOS & Android on Mobile in the UK July 2024

This article is for those who wish to have...

More News

UK Home Appliance Factory Contents Go Up for Auction

NCM Auctions, a specialist auctioneer and asset management firm, is auctioning the contents of a Merseyside-based factory on behalf of Glen Dimplex, a home...

Jack Mason – AI Innovation and Regulation Are Hurting Microsoft

Microsoft's recent decision to leave the OpenAI board amidst increasing regulatory scrutiny marks a significant juncture in the tech industry. This move, first reported...

Party Central Debuts in the UK: Transforming Event Planning with Cutting-Edge Marketplace

Party Central, an innovative platform designed to revolutionise the organisation of private events, weddings, parties, and corporate functions, has officially launched in the UK....