£2.1bn of CBILS loans were backed by personal guarantees

Business owners are on the hook for £2.1bn in personal guarantee backed loans which were taken out under the government-backed coronavirus business interruption loan scheme (CBILS).

According to research from Purbeck Personal Guarantee Insurance, approximately eight per cent of all CBILS loans were backed by personal guarantees. This equates to £2.1bn worth of loans taken over the past year.

Todd Davison, managing director of Purbeck Personal Guarantee Insurance said that the average personal guarantee backed loan value exceeded £774,000, while many CBILS loans surpassed £1m.

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“This is leaving a heavy burden on the shoulders of business owners and directors who now need to start paying back what they have borrowed knowing that failure to do so could have huge personal ramifications,” Davison said.

“We are still facing a great deal of uncertainty as restrictions ease from July 19 and infection rates continue to rise. It is important business owners look for ways to protect their assets if they consider taking further personal guarantee backed loans, through personal guarantee insurance for example.

Read more: Third of SME owners became personal guarantors in 2020

“This will offer some peace of mind that if their business does sadly fail, insolvency won’t put their personal finances at risk too.”

CBILS personal guarantees are limited to 20 per cent of any outstanding amounts following the sale of business assets during insolvency. This means that a business owner who takes out a £1m loan could be facing a personal loss of £100,000.

Read more: Small business owners warned about CBILS personal guarantees