Almost A Third Of SMEs Provided A Personal Guarantee
A significant number of SMEs require business finance to help support the business in some way. Whether it be a business loan to help fund the purchase of premises or an overdraft facility for working capital purposes perhaps to be used to purchase additional stock leading up to Christmas.
On occasions, the bank or other lender providing funding will require security to reduce its exposure to risk of loss should the business fail. Sometimes the owner of a SME will be asked to provide a personal guarantee but do you know how often? Well, according to Purbeck Insurance, who surveyed 500 owners of SME businesses, 32% of SMEs that have business finance and have a turnover of £1 million to £100 million had to provide a personal guarantee.
There will probably be many such business owners who had to provide additional security to support such a guarantee. This is often by way of a first or second mortgage over the matrimonial home thus involving their family.
Another interesting statistic is that 29% of SMEs made the decision not to arrange business finance due to the fact that he or she was being asked to provide a personal guarantee. Some people may be of the opinion that if the owner of an SME requires financial support then they should be “tied in” to such lending as much as possible and that providing a supported personal guarantee does just that.
The survey also revealed rather concerning that 58% of owners of SMEs do not seek advice when arranging some form of business finance.
Apparently, 74% of owners of SMEs said that he or she would be more prepared to provide a personal guarantee if they were able to arrange an insurance policy that provided some form of protection against giving such security. Well, you may be interested to know that it is possible to arrange personal guarantee insurance covering up to 80% of the personal guarantee amount. One such provider is Purbeck Insurance and you can find out more about such cover on their website. We do hope that some of you will have found the above information to be of benefit.