Bouncing back into business
It is no secret that managing cashflow is one of the hardest aspects of running a small business. Close to a third of SMEs (29%)[i] have found that this burden has worsened over the last year according to a survey by Purbeck Insurance Services, the UK’s only provider of Personal Guarantee Insurance.
For many businesses in start-up mode who have secured finance to help get their idea off the ground, there is an urgent need to help offset the loan payments against income – and this is where problems can easily arise.
This was the case for Xtreme360, a trampoline park located in St Neots, Cambridgeshire. The business was set up by its three directors who secured asset finance to fund the fit out of the building. The directors were required to sign personal guarantees as a condition of the loan and they took the wise step of obtaining Personal Guarantee Insurance from Purbeck Insurance services to help protect their personal assets in the eventuality of the loan being called in.
Unfortunately, the business fell into cash flow difficulties. Income was good but the profit was not covering the loan repayments to the extent they had hoped. It was during this difficult period that the directors called upon the valuable advice and counselling offered by Purbeck to policyholders.
David Parr, the Finance Director of Xtreme360, explains:
“Cash flow kills businesses and I could see this was becoming a real danger for us. We had started this business with the best of intentions, but costs escalated and until the asset finance was paid off, we would be operating at a loss.
We contacted Purbeck who helped us think through our options objectively. They introduced us to a finance broker to look at refinancing the debts; discussed the option of sub-letting excess space within the premises; and introduced capital allowances experts. They also put us in touch with one of Purbeck’s other clients who ran a franchised trampoline park to discuss best practices.
We worked out a restructuring of the finance and attracted a new investor who has got us back on track.
Our debts are now settled which is a considerable weight lifted after three years of considerable stress. Furthermore, the business is in excellent shape, very much a going concern and with growth plans working well.
Knowing that the Personal Guarantee insurance was in place created valuable peace of mind during a very difficult time, but Purbeck also did as much as they could to help us avoid defaulting on the loan. Their help, guidance and counselling, to me personally, over a significant period, was invaluable and very much appreciated.”
Todd Davison, Director of Purbeck Insurance Services adds:
“Xtreme360’s experience as a start-up is far from unique. This is why it’s vital that directors of small businesses look at ways they can mitigate the risk to their personal assets if they take a personal guarantee backed loan. But we also know that in many instances there are ways through the trading problems our policyholders face and will do our utmost to support them. We are delighted to have helped Xtreme360 bounce back after a tough first three years.”
If you’d like more information on how Personal Guarantee Insurance works or, if you’d like to speak to one of our advisors, please call 0208 004 7250.
[i] 500 SMEs surveyed by Censuswide, March 2019