This article is by Todd Davison, Managing Director, Purbeck Insurance Services
Party conference season is underway with major parties setting out measures aimed at supporting business. Labour has reinforced its pledge for stronger action on late payment as the Secretary of State for Business, Innovation, Science and Trade, in his first conference speech, recognises the real impact late payment has on SMEs. Meanwhile, the Conservatives propose cutting employers National Insurance Contributions (NICs) for 21-24 year-olds.
As business borrowing backed by personal guarantees more than doubles in Q3, however, these political promises might feel a little late.
More businesses borrowing more money
September was the busiest month on record for applications for Personal Guarantee Insurance on business loans. Applications were up 69% and loan values rose by a third year-on-year. The average loan backed by a personal guarantee is now £346,105.
This may come as no surprise to small businesses facing sharp inflationary pressures, including rising wholesale energy costs driven in part by the Middle East conflict and escalating fuel prices, placing pressure on already narrow margins.
38% of PGI for working capital, borrowed by working people
Behind the statistics though, are real people. Each application represents a U.K. business owner who has been asked to back a business loan with a personal guarantee. This is a heavy burden to shoulder, if the business becomes insolvent and cannot repay the loan, the lender can pursue the owner’s home, savings and other personal assets. Being a limited company offers no protection against a guarantee the owner has signed.
With small businesses feeling the squeeze, Q3 also saw loans to provide working capital rise 68% year-on-year, remaining the most common reason for borrowing. Despite the pressure of a business loan, hard-working directors are borrowing to make ends meet, demonstrating just how much personal risk they are taking to fund their businesses.
A chink of light on the horizon?
As many businesses continue to struggle, however, Purbeck’s figures on applications for personal guarantee insurance also offer some hope. Among the main reasons for borrowing, investment and expansion grew fastest. Applications linked to development finance rose 114% and refinancing rose 109%, while applications for investment in growth initiatives almost doubled (up 98%) and now account for 18.5% of the total.
More female entrepreneurs
Women are now starting businesses in record numbers, launching more than 150,000 new companies in a single recent year, more than double the number created five years earlier. Of course, this means that funding is crucial to new female entrepreneurs. This is being reflected in loan applications. PGI applications from women rose 86% year on year, outpacing the 60% rise among men.
As 2026 nears an end, more businesses are borrowing and they are borrowing more. This means that a lot of family homes and savings are standing behind business plans. While there are glimmers of hope, with applications for investment finance more than doubled and more female founders seeking out PGI to protect business loans, the fact that working capital remains the biggest reason for borrowing is concerning.
No matter what comes of the Conference Party season and forthcoming budget, a personal guarantee is hard to avoid in our current economic climate. Before signing, directors should understand exactly what they could be liable for, take independent advice, and think about how they would protect themselves and their family if the business ran into trouble. Personal Guarantee Insurance provides protection for up to 80% of the loan, and as our data shows, more and more business owners are seeking out this cover to borrow with greater confidence.