Purbeck Personal Guarantee Insurance has seen a 93 per cent year-on-year increase in the number of small- and medium-sized enterprise (SME) owners taking personal guarantee insurance (PGI).
The Purbeck Personal Guarantee Insurance Monitor for the first quarter of 2023 revealed 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.
Moreover, PGI applications from construction and property firms reached their highest level to date, up 30 per cent on the first quarter of 2022.
Demand for PGI is also strong in the manufacturing sector, up 181 per cent on the same quarter in 2022.
The average personal guarantee backed loan was £583,539 in the first quarter of 2023, down from £714,576 at the same time last year.
Purbeck found that the volume of PGI applications from start-up businesses had grown steadily over the past year, up 37 per cent on the first quarter of 2022.
However, the average unsecured start up loan has fallen from £123,353 to £64,176 year-on-year.
Working capital was cited as the top reason for finance in the first quarter of 2023 with 32 per cent 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 per cent compared to the first quarter of 2022 – the highest level recorded to date.
In line with the fall in the average loan value, the typical guarantee amount fell from £174,000 in the first quarter of 2022 to £141,000 over the same period this year.
One in 10 of those applying for PGI have personal guarantees in their name between £325,001 and £400,000.
“The take up of Personal Guarantee Insurance amongst SMEs provides a barometer for the state of the UK’s lending market for this important sector of the economy,” said Purbeck Personal Guarantee Insurance managing director Todd Davison.
“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.”