Small- and medium-sized enterprises (SMEs) which were established during the 2007-2008 financial crisis are driving a rise in business finance backed by personal assets.
According to new data from Purbeck Insurance Services, the size of the average personal guarantee rose by 32 per cent in 2019, to £176,687. Personal guarantees are often used as collateral when SMEs apply for new financing.
Purbeck’s data suggests that these teenaged businesses are “reaching a crunch time” where they need to either grow their reach or seek funding to maintain their cashflow. Purbeck’s managing director Todd Davison called on the government to use the upcoming Budget to offer a lifeline to these struggling SMEs.
“It is well-documented that start-ups are often born out of financial crises but our data suggests many businesses born in the 2007-2008 recession are now reaching a crunch time and need finance to sustain the business or scale up,” said Davison.
“It is crucial the March Budget delivers measures to help ensure businesses which have survived through changes in government, recession and the Brexit impasse, prevail.
“The good news is that today, a small business owner signing a personal guarantee can take insurance to protect their personal assets if the business fails. With both demand for personal guarantees and the value of personal guarantees increasing it is vital this protection is put in place.”