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The Analysis Comment
A fully
Todd Davison Managing director,
Purbeck Personal Guarantee Insurance Demand for personal guarantee backed
fi nance from small businesses doubled in March 2022, as fi rms grappled with rising costs. Applications for Personal Guarantee Insurance to support small business funding rose 50.5% Q1 2022 vs Q1 2021 and in March 2022 alone, applications rose 108% on March 2021.
Depleting cash reserves This new analysis of small business fi nance underlines how Brexit, skills shortages, rising material and fuel costs are all depleting cash reserves with fi nance for ‘Working Capital’ the main reason for a small business loan. We found that in the fi rst Quarter of 2022,
the biggest proportion (35%) of fi nance applications with a personal guarantee attached were for ‘Working Capital’, surpassing any other reason for new funding. Applications for personal guarantee insurance to support funding for ‘Working Capital’ were up a huge 88% in Q1 2022 com- pared with Q1 2021.
Development While ‘Working Capital’ is the main reason for funding, small businesses are also securing new fi nance to support ‘Development’ and for ‘Investment in Growth Initiatives’. Indeed, applications for fi nance for ‘Development’ grew 69% from Q1 2021 to Q1 2022.
Increased borrowing The owners of small businesses are also borrowing more year on year. Our analysis shows the average loan amount has risen from £142,718 in Q1 2021 to £174,104
May 2022
www.CCRMagazine.com
Unsecured loans have also risen in popularity and are the main type of fi nance secured by small businesses – 39% of all personal guarantee insurance backed loans were of this nature in Q1 2022 compared to 28% in Q1 2021
in Q1 2022, a jump of 22%. In fact, one in fi ve loan applications (19%)
were for loans of £375,000 to £400,000 in Q1 2022 – a signifi cant increase on Q1 2021, with application volumes for this value of loan rising 160%.
Unsecured Unsecured loans have also risen in popularity and are the main type of fi nance secured by small businesses – 39% of all personal guarantee insurance backed loans were of this nature in Q1 2022 compared to 28% in Q1 2021.
Obvious concern While there is obviously a concern that small businesses are becoming more indebted, the fact that applications for personal guarantee insurance to support this fi nance have risen so substantially year on year must be seen as a positive. These business owners are typically leading
well-established businesses that have been in operation for 14 years on average and have in the region of 28 people working for them. They are being incredibly responsible by
taking steps to protect their assets, should their business ultimately fail.
Reliant Access to fi nance is increasingly reliant on the business owner signing a personal guarantee so it is vital small business leaders understand how they can mitigate the risks to give them the confi dence to secure the new fi nance they need – whether that’s to sustain the business through this challenging economic period, or to grow. CCR
11
guaranteed return?
Applications for personal guarantee backed small business loans up 50%
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