Purbeck Personal Guarantee Insurance Monitor Q4 2024

January 2025: Small businesses are increasing their financial resilience in the face of increasing costs based on the latest analysis of personal guarantee backed loan applications by Purbeck Insurance Services – the UK’s only provider of personal guarantee insurance.

Key Facts

• Demand for Personal Guarantee Insurance (PGI) for small business loans jumps 45% in 2024 vs 2023
• Average personal guarantee backed small business loan rises 9% to £174k in Q4 2024 from £159k in Q4 2023
• 1 in 5 (22%) loans in Q4 2024 were for investment or a business acquisition
• Most loans are for working capital (33%) to keep a business going
• 50% year on year rise in start-ups seeking personal guarantee backed loans
• Value of loans to start-ups up 21% year on year

Demand for finance strongest in start ups

In the final quarter of 2024, there was a 25% increase in small businesses applying for personal guarantee backed business loans compared to the same quarter of 2023. Indeed, for the whole of 2024 there was a 45% increase in small businesses taking on personal guarantee backed finance. This shows how personal guarantees have become a standard requirement in small business lending.

Underlining the increased level of entrepreneurship in the UK[i], 50% more start-ups (firms that have been established for under 2 years) applied for funding in Q4 2024 and the average loan to these young businesses jumped from £100,399 in Q4 2023 to £121,668 in Q4 2024 – this is a 21.28 % year on year increase. In contrast, the average loan taken by a firm over 2 years old rose marginally by 6% from £238,645 in Q4 2023 to £254,203 in Q4 2024.

Across the board, the average loan value was £174,627 in Q4 2024 up from £159,664 in Q4 2023.

A third of loans needed for working capital but 1 in 5 fund growth

In Q4 2024, the main reason for a new loan was to provide working capital (33% of applications in Q4 2024). This is in line with the whole of last year when on average 34% of loans were for working capital.

More positively, 1 in 5 loans in Q4 last year (22%) were for investment in growth initiatives or business acquisitions.

Unsecured loans remain the main type of funding with 40% of applications in Q4 2024 for this type of loan, this was followed by secured loans (16%).

Commentary

Todd Davison, MD of Purbeck Personal Guarantee Insurance said: “There remains a keen hunger for finance amongst small businesses, and in particular new firms, which is positive news for the economy. It seems there is a good deal of realism and pragmatism amongst small businesses in the face of increasing business costs following the Budget in October 2024. Small firms know they need to adjust to increased cost pressures and personal guarantee backed finance can help them through - whether that's via their bank, an alternative businesses lender or through initiatives such as the Growth Guarantee Scheme. With 1 in 5 using finance to fund growth or a business acquisition, many small businesses are on a set course to achieve their ambitions, despite the challenging macroeconomic climate.

“The fact that small businesses are increasingly using insurance to mitigate some of the risks associated with personal guarantee backed loans shows they are taking positive steps to improve their financial resilience. They are using this tool to gain access to the finance they need without exposing themselves to unnecessary risks. It remains vital however that firms familiarise themselves with the risks of personal guarantees, particularly those that form part of the Growth Guarantee Scheme. This scheme does not protect a business owner from a personal guarantee, it protects the lender. There should be no misunderstandings over the guarantor’s liability should be the business ultimately fail.”

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