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Personal guarantee insurance applications surge by 68% in 2023

In the final quarter of 2023, more than a third of a proprietors and directors of small businesses found themselves compelled to personally guarantee their enterprises’ survival, according to new stats from Purbeck Personal Guarantee Insurance monitor.

The data reveals that a notable 34% of PGI applications during Quarter 4, 2023 were earmarked for loans aimed at bolstering the businesses’ working capital—an unprecedented peak for the entire year.

A deeper examination across the entirety of 2023 versus the preceding year exposes a remarkable 67.5% surge in applications for personal guarantee insurance. Similarly, a comparative analysis between Quarter 4, 2023, and the same period in 2022 reflects a substantial 63% increase in applications.

Purbeck Personal Guarantee Insurance, through its quarterly analysis, remains the sole monitor scrutinising personal guarantee-backed loans sought by small business proprietors and managers.

Unveiling the financial hurdles confronting certain enterprises, only 10% of applications originated from new businesses with less than two years of trading—a historic low recorded by Purbeck since its inception in 2017.

Furthermore, 45% of applications pertained to unsecured loans, reaching an all-time high. This type of financing occurs when the business lacks sufficient capital or assets to cover the debt and provide the lender with security. Once again, this underscores the precarious financial landscape faced by small businesses presently.

These findings coincide with the Federation of Small Businesses (FSB) reporting a tightening credit environment for SMEs, with a mere 53% of credit applications proving successful in the last quarter.

Simultaneously, as SMEs grapple with challenges in securing new financial avenues, the latest statistics on company insolvencies have surged to their highest level since 1993.

Todd Davison, MD of Purbeck Personal Guarantee Insurance said: “The rise in the number of founders and directors applying for PGI to support unsecured loans is indicative of the way personal guarantees have become part and parcel of lending to small businesses.  It also highlights the precarious nature of running a small firm.

“Inflation, the energy crisis, government cuts for support and supply chain issues have all impacted the rise in cost of doing business.  Our data highlights how Personal Guarantee Insurance has proved so crucial in overcoming the risks of providing a personal guarantee, helping many smaller businesses access the cash they so desperately need.”

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