Key Findings:
- The average personal guarantee backed loan to a start-up (under 2 years old) fell in value by 38% year on year to £94,265
- Overall, the average personal guarantee (PG) backed small business loan fell by 17.5% in value to £204,635 in Q3 2024 vs Q3 2023
- 38% of personal guarantee backed loans are for working capital - this remains the number one reason for applying for a PG backed loan
- In September 2024, the number of applications for Personal Guarantee Insurance exceeded any time previously, bar March 2024
LONDON, Oct. 21, 2024 (GLOBE NEWSWIRE) -- The latest data on loans to small businesses suggests firms are being more cautious about their financial commitments after higher levels of confidence in Q2 2024. With Budget day looming along with energy price rises, The Q3 2024 Personal Guarantee Insurance Monitor from Purbeck Insurance Services shows that small businesses have cut back the amount they are borrowing from lenders, despite promises by the Government not to raise business taxes.
While the number of applications for personal guarantee backed loans is up 43% on 2023, The Q3 2024 Personal Guarantee Insurance Monitor shows the average loan to small businesses of all ages fell 17.5% to £204k, compared to the same period in 2023. Notably, there was a big fall in the value of loans to start-ups (under 2 years old) year on year to the lowest level recorded to date of just £94k.
Working capital to support cashflow and to keep the business ticking along remains the number one reason for applying for a PG backed small business loan with 38% of applications for this reason. A further concern for the health of the UK economy is that the number of applications for loans to support investment in growth initiatives fell. Just 13% in Q3 2024 were for this reason from 19% in Q2 2024. Again, this suggests a deepening level of caution and wariness amongst small businesses.
Most applications (41%) were for unsecured loans (still requiring a personal guarantee) while 19% of loans were secured/asset-backed lending. Reflecting the lower value of loans for which smaller businesses have applied, commercial mortgages were at their lowest level in a year along with asset finance.
Todd Davison, MD of Purbeck Insurance Services said: “Once again, small businesses are facing big uncertainties as we head into Winter 24/25. This is undoubtedly influencing their willingness to take on debt at a level they may not be able to service. This is a sensible approach but we must not lose sight of the fact that even so, compared to 2023, the appetite for new finance is still very much in evidence as is the demand for personal guarantee insurance to make the risk of a loan less risky for the business owner who has been asked to supply that guarantee. On average business owners are seeking £170,608 of Personal Guarantee Insurance protection from £152,039 in Q3 2023. Ultimately, small businesses are the lifeblood of the economy and they need access to the funding they need to invest and grow. Right now, it appears many are simply ‘treading water’, as they await the outcome of the Budget.”
About PGI: Personal guarantee insurance (PGI) is a product used by small business owners to protect against the risk of a personal guarantee being called in for a business loan. Lenders will ask for a personal guarantee when there are not enough assets in the business to repay the loan if the business fails. The Purbeck Personal Guarantee Insurance Monitor is the only source of data on the number and size of personal guarantee backed loans being secured by small business owners where insurance has been taken to protect against the risk of the loan being called in.
Notes to Editors
About Purbeck Insurance Services
Purbeck Insurance Services is a Personal Guarantee Insurance specialist supporting Small and Medium sized Enterprises ("SMEs") and promoting business confidence
Insurance policies backed by Markel International Insurance Company Limited ("Markel"), an A-Rated insurer, as rated by A.M. Best (A), Fitch (A+) and S&P (A). Markel is a shareholder in Purbeck Insurance Services.
Purbeck Insurance Services is directly authorised and regulated by the Financial Conduct Authority
Insurance is underwritten by Purbeck Insurance Services, an authorised Managing General Agent ("MGA") of Markel
Purbeck Personal Guarantee Insurance is annual insurance policy that provides Director(s) with insurance cover in the event their business lender calls in the Personal Guarantee (provided by the Director(s) as part of raising business finance)
Key features of Personal Guarantee Insurance:
- Premiums are competitively priced and based on individual circumstances
- Cover is available for Personal Guarantees signed to support a wide range of business finance facilities
