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Personal Guarantee risk for over 420,000 small business owners

Posted by Todd Davison on Apr 16, 2020 2:26:08 PM
  • It is estimated that over 420,000 small business owners in the UK are acting as personal guarantors for business loans and could be facing the risk of losing their home due to the impact of Covid-19.  

  • Businessman standing with umbrella under black cloud
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  • The estimate is regarded as conservative and could be closer to 560,000.   Purbeck is calling on the Government to consider a further measure to ease the pressure on small businesses by asking lenders to agree to a three month moratorium on existing loans.

  • 1.4 million UK small businesses have external funding in place according to the BDRC Finance Monitor[i].  Of these businesses, Purbeck estimates 30% - 40% will be backed by a Personal Guarantees by the business owner/s or directors.

    The Coronavirus Business Interruption Loan Scheme has got off to a stuttering beginning with recent assertions that personal guarantees will not be required from business owners applying for funding.  However what is not clear is how lenders will regard applications from businesses where a personal guarantee backed loan is already in place.   Purbeck fears that this could disadvantage small business applicants for loans under the scheme.  Added to this, small business owners appear reticent to add another loan to their debt burden.

    Todd Davison, MD of Purbeck Insurance Services said: “While just 15% of small business owners with Personal Guarantee Insurance in place are showing signs of severe financial distress, the broader small business community is suffering.  Reports suggest however, that the number of businesses securing funds through the CBILS is at a low level.  Our customers are fearful of committing to more debt when they have existing loans to honour. We are advising them to contact existing lenders and landlords to discuss a payment holiday but a wider initiative to offer small businesses a three month loan moratorium would help ease the financial burden at this crucial time.”

Topics: #pgi, #personalguarantee, #personalguaranteeinsurance, #commercial guarantee, #commercial finance, #bankruptcy

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