Following news of an 18-month high in registered company insolvencies, small- and medium-sized enterprises (SMEs) owners have been urged to take up personal guarantee insurance.
Purbeck Personal Guarantee Insurance estimated that over 420,000 small business owners in the UK were acting as personal guarantors for business loans prior to the pandemic.
Meanwhile, data from The Insolvency Service has revealed that in August there were 1,348 registered company insolvencies, the highest since the first UK lockdown in March 2020.
Purbeck said SME owners should take out personal guarantee insurance to protect their personal assets in the event that their company becomes insolvent.
“Many small and medium-sized businesses are now facing a very bumpy ride as pandemic support measures such as VAT deferrals and the commercial rent moratorium ease back,” said Todd Davison, managing director of Purbeck Personal Guarantee Insurance.
“For those business owners which have taken the serious step of putting their personal assets such as their home and life savings on the line to secure a business loan, this will be a very worrying time. Personal guarantee insurance mitigates the risk, providing peace of mind that if the loan is called in, up to 80 per cent will be settled by the cover.
“With the government support schemes starting to ease off, and access to finance increasingly likely to depend on signing a personal guarantee, personal guarantee insurance will step in to help protect the UK’s SME owners and directors – in more ways than might be expected from an insurance product.”
In July, the insurance provider calculated that £2.1bn in loans under the coronavirus business interruption loan scheme were taken by business owners and directors which had personal guarantees attached.