Solving Personal Guarantee's image problem
You need to be a very confident person to put up your personal estate as collateral when taking out a loan. Some business directors will sign a Personal Guarantee even if it makes them feel uncomfortable. For others, it’s deemed too much of a risk.
Although a director may not be comfortable with the thought of a Personal Guarantee, they understand that it could improve their chances of accessing finance.
So, just how uneasy are directors about taking out a Personal Guarantee?
Last year, Purbeck conducted a survey among 250 business directors in the UK to find out their attitudes towards Personal Guarantees.
Nearly half (44%) of the respondents said they had a Personal Guarantee in place – of those directors, a score of 4.2 (out of 10) was recorded for how comfortable they felt when signing their Personal Guarantee.
Meanwhile, the 56% of respondents who hadn’t signed a personal guarantee recorded a score of 2.2 (out of 10), suggesting they’d be very uncomfortable about the prospect of potentially putting their personal assets at risk in order to borrow money for their business.
Helping directors feel more comfortable
It’s in the interests of finance facilitators to make business directors feel more relaxed about signing a personal guarantee.
No amount of talking is going to help directors come away from a meeting feeling any better about the prospect of taking out a Personal Guarantee – they need a risk-mitigating solution.
When asked how they’d have felt if they could have had Personal Guarantee Insurance in place at the time of signing, the comfort-level score among those with existing agreements nearly doubled to 8.1.
When the same solution was put to respondents who hadn’t signed a Personal Guarantee, the feelings of comfort improved almost threefold.
What this means for lenders and brokers
If you require borrowers to sign a Personal Guarantee, the survey findings suggest directors are more likely to put their name on the dotted line if you’re able to introduce them to insurance to cover a percentage of the loan.