MORE than a third of small- and medium-sized enterprises (SMEs) are unaware of the risk of losing their home for a business loan.
A poll by Purbeck Insurance Services has found that 39 per cent of business owners are unaware that their personal assets such as their home and life savings could be at risk if they signed a personal guarantee to secure finance for their business.
The research found 32 per cent of SMEs turning over more than £1m a year were required to sign a personal guarantee as condition of a finance deal.
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Purbeck is urging business owners to seek professional, independent advice before signing a personal guarantee and look for ways to mitigate the risk of losing their personal assets should the business default on the loan.
It follows the launch of the Business Finance Council to help SMEs ahead of Brexit, which Purbeck hopes will educate borrowers on the risks of different loans.
“We welcome the launch of the Business Finance Council and hope this will open up new opportunities to access finance for small businesses,” Todd Davison, director of Purbeck Insurance Services said.
“In particular, the Enterprise Finance Guarantee should open the door to easier finance for small firms without the security to arrange a loan via traditional routes.
“However, not all SMEs will qualify so it is vital that as part of its support, the council helps businesses understand both the pros and cons of personal guarantee backed loans and the ways they can mitigate the risks.”