- 23% rise in personal guarantee protection for small business owners in the first half of the year
- Biggest growth (33%) in businesses over 2 years old
- Protection for Personal Guarantee backed loans of £50,000 - £75,000 up 138%
- Small business owners aged 46-60 most likely to mitigate the risks of a business loan but younger entrepreneurs are catching on
In the first six months of the year, the number of small business owners and directors who purchased Personal Guarantee Insurance for a Personal Guarantee backed finance deal rose 23%, compared to the previous six months. Most small business owners buy protection for loans of £25,001-£50,000 and the demand for insurance protection for this bracket has grown 38%. However, the number of policies for loans of £50,000-£75,000 has risen by 138% over the same half year period.
The new data released by Purbeck Insurance Services, the UK’s only insurance provider to solely offer Personal Guarantee Insurance suggests the economic uncertainty caused by a drawn out Brexit is encouraging the owners and directors of small businesses across the UK to take measures to protect their personal assets if they default on a business loan. A Personal Guarantee is often a requirement for a business loan, particularly for small businesses, and is signed by the director or directors giving a guarantee that if the loan is not paid, their personal assets including their home can be used to settle the debt. Small businesses that have been established for 2 years or more have seen the sharpest rise in Personal Guarantee Insurance with a 33% increase. The two-year mark is usually a crucial time for businesses as initial start-up funding dries up. Small business owners aged 46-60 are the most common purchasers of Personal Guarantee Insurance – this age group bought 26% more policies in H1 2019 than the previous six months. In contrast, Purbeck has also seen a 275% increase in 26-35 year olds acting as Personal Guarantors and buying insurance protection to mitigate the risk suggesting prudence is becoming a priority for some of the UK’s youngest entrepreneurs. Todd Davison, Director for Purbeck Insurance Services said:
“Demand for Personal Guarantee Insurance from small business owners has shown a marked increase in the first 6 months of 2019. It’s a strong indicator of the uncertainties many businesses are facing. Those that are beyond start-up mode are being particularly shrewd, by taking action to protect their personal assets as they actively seek finance to secure their business’s future. The economic environment we are operating in today is unprecedented and small businesses are evidently looking for ways to build their financial resilience as the clock counts down to 31st October.”
Personal Guarantee insurance provides protection against the risk that the Guarantee is called by a lender. It will offset any outstanding obligations called in under a Personal Guarantee. The level of cover is based on a fixed percentage of the Personal Guarantee the company director wishes to insure and this is dependent on whether the corresponding finance facility is secured or unsecured.