Businesses seeking larger loans under the coronavirus business interruption loan scheme (CBILS) are opting for personal guarantee insurance to protect themselves against risk, an insurer has found.
Firms must sign a personal guarantee if they wish to take out a CBILS loan worth above £250,000.
Purbeck Insurance has supported a number of applications for personal guarantee insurance for CBILS loans.
The insurer said as a result of helping firms offset the personal guarantee requirement, the value of its personal guarantee backed business loans to firms during the pandemic has risen on average by 45 per cent from 2019.
Personal guarantee insurance offers protection against the risk of a personal guarantee being called by a lender and will offset any outstanding obligations called in under a personal guarantee following a business failure.
The level of cover is based on a fixed percentage of the personal guarantee the company director wishes to insure and this is dependent on whether the corresponding finance facility is secured or unsecured.
“CBILS has helped many viable businesses survive during the pandemic,” said Todd Davison, managing director of Purbeck.
“During the pandemic, the average loan size across our book and pipeline – both CBILS and independent loans – has been 45 per cent up on 2019 at £634,543 compared to £436,171 and the average size of the personal guarantee has been £200,148.
“With time now very tight to secure a loan under CBILS, businesses need to know they can mitigate the risk of signing a personal guarantee rather than let this be a barrier to securing the funds they need under the favourable terms on offer.”
Purbeck announced earlier this month that it saw applications for insurance on new business loans double in September.
As of 18 October, 73,000 businesses have secured CBILS funding since March, according to Treasury data.
Applications for CBILS loans close on 30 November 2020.