93% year-on-year increase in small business owners taking personal guarantee insurance

The fear of business failure is not stopping small and medium-sized business owners from taking on new finance, using insurance to reduce the risk.

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A recent report shows a huge jump in the number of SME owners protecting their homes, cars and other assets with Personal Guarantee Insurance (PGI).

The survey compiled by Purbeck Insurance showed that in March 2023, more SME owners applied for PGI to mitigate the risk of business failure than at any time previously. 

The volume of PGI applications from start-up businesses was particularly strong, up 37% in Q1 2022, with a marked increase in finance for investment in growth initiatives, where the volume of applications was up 196% compared to Q1 2022: the highest level recorded to date.

The increase in PGI applications

With the COVID-19 pandemic having caused significant financial damage to the small business economy worldwide, business owners are still currently looking for ways to mitigate risk and protect their personal assets. In addition to key man cover, many founders are seeing personal guarantee insurance as essential to their business continuity plans.

Todd Davison, MD of Purbeck Insurance believes the government’s lack of support has contributed to the huge rise in PGI takeup: “It is perhaps no surprise that March was a record month for applications for Personal Guarantee Insurance after the UK Chancellor failed to deliver much cheer to the small business community in this years’ spring budget.”

In general, SMEs are more vulnerable to economic shocks. They are less likely to have large cash reserves or fast access to credit to bail them out of emergency business situations. 

Plus, this large jump in PGI takeup could also indicate that small business owners are being asked to provide personal guarantees to secure loans, which has further increased the demand.

Looking ahead

As SMEs look to survive the turbulent events of the past couple of years, it is likely that the demand for personal guarantee insurance will increase. 

However, according to Davison, the news isn’t all downbeat. “We have seen more businesses securing personal guarantee-backed finance for growth than ever before using PGI to ease the financial worry that comes with that commitment.”

Written by:
Stephanie Lennox is the resident funding & finance expert at Startups: A successful startup founder in her own right, 2x bestselling author and business strategist, she covers everything from business grants and loans to venture capital and angel investing. With over 14 years of hands-on experience in the startup industry, Stephanie is passionate about how business owners can not only survive but thrive in the face of turbulent financial times and economic crises. With a background in media, publishing, finance and sales psychology, and an education at Oxford University, Stephanie has been featured on all things 'entrepreneur' in such prominent media outlets as The Bookseller, The Guardian, TimeOut, The Southbank Centre and ITV News, as well as several other national publications.

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