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93% Back to Back Yearly Increase in Small Business Owners Taking Personal Guarantee Insurance – Q1 2023

Big uptick in applications with 32% of personal guarantee backed loans for working capital


April 2023
: The fear of business failure is not stopping small and medium sized business owners from taking on new finance, regardless of a 33% rise in insolvencies[i], as increasing numbers are using insurance to reduce the risk. The Purbeck Personal Guarantee Insurance Monitor for Q1 2023 shows more SME owners and directors secured finance with insurance to protect their home, car and other personal assets from being called on to pay back a business loan, than at any time previously.

Todd Davison, MD of Purbeck Personal Guarantee Insurance said: “It is perhaps no surprise that March was a record month for applications for Personal Guarantee Insurance (PGI) after the UK Chancellor failed to deliver much cheer to the small business community in his Budget. Interest rates rose again and we saw the end of the Energy Bills Relief Scheme[ii], piling further pressure on struggling SMEs. However, it’s not all downbeat – we have seen more businesses securing personal guarantee backed finance for growth than ever before, using PGI to ease the financial worry that comes with that commitment.”

Key facts:

  • In March 2023, more SME owners applied for personal guarantee insurance[iii] (PGI) to mitigate the risk of business failure, than at any time previously
  • The number of applications for PGI for business loans was up 93% year on year in Q1 2023
  • PGI applications from Construction and Property firms reached their highest level to date, up 30% on Q1 2022
  • Demand for PGI is also strong in the Manufacturing sector – up 181% on the same quarter in 2022
  • The average personal guarantee backed loan was £583,539 in Q1 2023, down from £714,576 in Q1 2022.
  • The volume of PGI applications from start-up businesses[iv]has grown steadily over the past year and up 37% on Q1 2022.  However the average unsecured start up loan has fallen from £123,353 to £64,176 year on year.
  • Working capital was the top reason for finance in Q1 2023 with 32% of applications for this reason.
  • However there has also been a marked increase in finance for investment in growth initiatives – the volume of applications was up 196% compared to Q1 2022 – the highest level recorded to date.
  • In line with the fall in the average loan value, the typical guarantee amount has fallen from £174,000 in Q1 2022 to £141,000 in Q1 2023
  • 1 in 10 of those applying for PGI have personal guarantees in their name between £325,001 and £400,000

Todd Davison continues: “The take up of Personal Guarantee Insurance (PGI) amongst SMEs provides a barometer for the state of the UK’s lending market for this important sector of the economy.  The increasing demand for cover shows how common it is now for lenders to ask for personal guarantees as security for business loans for SMEs. It is also clear that business owners and entrepreneurs are under no illusions over the personal risks of personal guarantee backed loans and are taking steps to mitigate those risks as costs continue to rise.

“It is imperative that small businesses get access to the cash they need to sustain themselves and grow in the year ahead, so that they can come out fighting when the economy starts to improve. Personal Guarantee Insurance is playing a key role in making the personal commitment to pay back a business loan more palatable.”

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